Proceeds of Crime Bill

Public Bill Committee, 22 January 2002.

Standing Committee B

Clause 322 - Arrangements

Bill O'Brien (Labour, Normanton)

I remind the Committee that with this we are taking the following amendments: No. 519, in clause 323, page 187, line 14, at end insert—

'(e) the value of the property involved does not exceed £1,000'.

No. 520, in clause 324, page 187, line 41, at end insert—

'(c) the amount of money involved does not exceed £1,000'.

No. 521, in clause 325, page 188, line 40, at end insert—

'(d) the disclosure relates to money or property not exceeding the value of £1,000'.

Nick Hawkins (Conservative, Surrey Heath)

At the end of our previous sitting we were discussing the introduction of de minimis provisions. The Minister of State, Scotland Office, had just suggested that the amendment was completely at odds with the philosophy of the Bill.

Bob Ainsworth (Labour, Coventry North East)

Hear, hear.

Nick Hawkins (Conservative, Surrey Heath)

I hear the Under-Secretary agreeing with his hon. Friend. I am indebted to those in the Law Society of England and Wales who have carried out a great deal of work in the few days since our previous debate and have sent further information to my hon. Friend the Member for Beaconsfield (Mr. Grieve) and me. It turns out that, far from what the Minister of State so confidently asserted, there are already de minimis provisions that he failed to mention. I am sure that that was merely an error on his part, but let us consider the Money Laundering Regulations 1993 and the second European money laundering directive. Labour Ministers are keen on European directives now. I remember when the Labour party was the most Euro-sceptic party of them all, but it has done a 180 degrees volte-face since those days.

The Minister of State, Scotland Office (Mr. George Foulkes) rose—

Nick Hawkins (Conservative, Surrey Heath)

I shall give way to the Minister later; no doubt he will wish to defend his European honour. I imagine that he will tell me that he was always pro-European, but I make an honourable exception about such matters in the case of the hon. Gentleman. In the

days when his party was Euro-sceptic he used to be unorthodox, but now his party has come round to his traditional way of thinking.

Under the Money Laundering Regulations 1993, identity must be verified for the following one-off transactions: first, if

''payment is to be made by or to the applicant for business of the amount of ecu (euro) 15,000 or more'',

which under the regulations was roughly equivalent to £9,300. I am not sure whether the euro has fallen in value yet further so that that exchange rate is out of date. Perhaps I should not intrude on private grief, given that I read in my daily paper that the hon. Member for Glasgow, Pollok (Mr. Davidson) was leading the charge against his own Government on European matters. Unaccountably, he is not in Committee this morning. I am not sure whether the Whip has had anything to do with his absence.

Secondly, under the Money Laundering Regulations identity must be verified if it appears, at the outset, to a person handling any of the transactions:

''(i) that the transactions are linked, and

(ii) that the total amount in respect of all of the transactions, which is payable by or to the applicant for business is ecu 15,000 or more; or

(b) at any later stage, it comes to the attention of such a person that paragraphs (i) or (ii) of sub-paragraph (a) above are satisfied.''

I am sure that to those listening to me read them out, such provision are as clear as mud, but I would be happy to copy them for members of the Committee. The consequence of the requirements is that identity does not need to be verified when the amount involved is £9,300 or less in a one-off transaction or linked one-off transactions. Even though the Minister failed to mention it, we have had such de minimis provisions, and those in Europe to whom he refers so often have been happy with them. The provisions under the second money laundering directive are similar, and they were finalised as recently as October 2001.

We have picked a figure of £1,000 and Ministers have said that they will not enter into a Dutch auction on the appropriate level of the limit. We said that we would be happy if it was £500, or even £250. Ministers rejected those figures out of hand. Now we discover that in October 2001, the Government concurred with a second money laundering directive that had much higher de minimis thresholds. In the view of the Law Society of England and Wales, and in that of my hon. Friend the Member for Beaconsfield and myself, a combination of the provisions that the Government have already agreed to in Europe and what we have suggested would entirely address the Government's worries.

Although we have had a good and thorough debate, we may need to return to such matters. I have received from the Law Society some forms from the National Criminal Intelligence Service, which I will copy to any interested members of the Committee. I have not seen the forms before. They are blank and do not contain any confidential information, but they give guidelines. They are printed on the headed notepaper of the economic crime unit of NCIS, and at the top is the

name of Mr. Abbott, QPM, BA (Hons), who is the director general of NCIS. The form provides notes on how disclosures are made, and there are blank spaces for all the details of the main subject, such as account details. Now that we know something about how NCIS operates, Ministers may be forced to provide more thorough responses to some of the worries that we have expressed.

When we come to amendment No. 520—the crucial part of the de minimis provisions—I shall press it to a Division, so we shall not press the lead amendment, No. 518, now. I am willing to withdraw that amendment, but only on the basis that we are sticking to our arguments in favour of the whole group. Although it is not the first amendment in terms of the order of the Bill, we believe that amendment No. 520 is the most appropriate one on which to divide the Committee. I shall not press the earlier amendments in the group, but I want to make it clear that I will seek a Division when we come to clause 324, to which amendment No. 520 refers.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

Before you ask the Committee to give the hon. Gentleman leave to withdraw amendment No. 518, Mr. O'Brien, may I say that I thought that I had made some very convincing arguments last time we met—[Hon. Members: ''Hear, hear.''].

None of those arguments has been refuted by the hon. Gentleman. He spoke only about the fax that he has received the Law Society of England and Wales. However, that deals with money laundering regulations, which cover different grounds. The Bill is about criminalising people who are carrying out money laundering, whereas the regulations deal with procedures and good practice to avoid money laundering. That is an entirely different matter. De minimis provisions in regulations are for identification requirements. We could not ask for identification and record retention in an infinite number of tiny transactions. That would be ridiculous.

Nick Hawkins (Conservative, Surrey Heath)

I did not think that there was any need to repeat all the arguments that we proposed at our previous sitting. Does the Minister not understand that the fact that in another area the Government have agreed to de minimis limits that also relate to reporting, reinforces our point? Although he says that those cover different ground, the concept of de minimis and the reasons for it are germane in both cases.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

The hon. Gentleman may think that, but I do not believe that a de minimis provision would be germane. He is talking about something different from cases in which we report that we suspect that a crime has occurred. Regulations require banks to report suspicious transactions of any size. He has mixed up the issue. The Law Society of England and Wales has taken up an entirely different matter. That is an extra reason why the hon. Gentleman is wise to suggest that he will withdraw his amendment. I think that he would be wise not to press amendment No. 520, either.

Nick Hawkins (Conservative, Surrey Heath)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 322 ordered to stand part of the Bill.

Clause 323 - Acquisition, use and possession

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 486, in page 187, line 21, leave out from 'provision' to end of line 22 and insert

'of goods or services provided by a person who knows or suspects that they may help another to carry out criminal conduct is not consideration'.

Let us recollect the debate that we had in the previous sitting on the proper test of knowledge. That issue was tied in with clauses 321 and 323. Amendment No. 486 is particularly relevant in view of the Division that we have just had on amendment No. 428. I wish to concentrate specifically on amendment No. 486, as there may be a general debate thereafter when we discuss whether the clause should stand part of the Bill.

The Law Society suggested the amendment to me. When I first read the clause I had some difficulty in understanding the Law Society's point. However, now that I do, I am persuaded that there is an issue that the Committee must consider carefully. As clause 323 stands, it provides that a person commits a criminal offence if he

''acquires criminal property . . . uses criminal property''

or

''has possession of criminal property.''

As we said last week, because of the bizarre way in which the clause is drafted, the test of whether property is criminal property relies in part on the mens rea of the person who holds the property—that is, whether he knows or suspects that the property is criminal property when he receives it.

There are also provisions under subsection (2) that emphasise that there are circumstances in which a person would not commit such an offence. Apart from

paragraph (a), which states that a person should make an authorised disclosure, paragraph (c) provides that a person does not commit the offence if

''he acquired or used or had possession of the property for adequate consideration''.

However, subsection (3)(c) provides that

''the provision . . . of goods or services which help''

a person

''to carry out criminal conduct is not consideration.''

I see the logic behind that. Those who drafted the legislation wished to emphasise that if a person acquires property for adequate consideration, he does not fall within the scope of the clause. Oddly, although a person might acquire property in the full knowledge that it had a tainted origin, he would not be criminally liable under the clause provided that he paid good consideration for it. However, such a person may be liable for handling stolen goods if the property is stolen rather than the proceeds of crime.

What happens if a solicitor provides advice? That question has worried the Law Society, and it raises an interesting point. Clearly, solicitors whose clients come to them for advice are bound, as we have said, by legal and professional privilege. An exemption is provided so that a solicitor would not have to make any disclosure in such circumstances. Indeed, a solicitor would be prohibited from making a disclosure.

A problem arises if a solicitor discovers from information that he has received while providing advice that it is reasonable to suspect that he has been paid with money that is the proceeds of crime. That must happen frequently. If I apply my experience as a barrister, I can see that if one has a dodgy client who seeks advice, and one forms a view while providing the advice that he looks like a crook, when the subsequent payment comes through from the solicitor—although of course, legal and professional privilege prevents one from disclosing the information except in limited circumstances—one may think, ''I wonder where all that money came from.'' That has certainly happened to me, and I am sure that it happens to solicitors, too, during their daily practice.

On the basis of subsection (2)(c), the solicitor should have nothing to worry about if he provided proper consideration—the service—in return for the payment. A rather curious problem arises if the solicitor concludes after giving the advice that that advice could have been used by the client to help him to carry out criminal conduct. In such circumstances, he would fall foul of subsection (3)(c) and not have provided good consideration for his payment. He might be bound by legal professional privilege, but technically he would have committed the criminal offence, because under the clause, he would not have provided good consideration in return for the criminal property that he suspects has been pushed in his direction from the client.

As an illustration, let me try to give an example. From personal experience as a barrister—circumstances for a barrister might be slightly different, but a solicitor would have exactly the same problem—I can give a matrimonial case as an

example. A solicitor's client comes along and says that she is seeking a divorce from her husband. In the course of providing instructions to the solicitor, the client informs the solicitor that her husband has been a criminal and has concealed assets—I have certainly had that experience when providing advice as a barrister. Clearly, in those circumstances—especially after the passage of the Bill—there are several things that I would be likely to tell the client. One of the things that I, or the solicitor, would tell the client to do would be to inform NCIS. However, because of legal professional privilege, neither I nor the solicitor could do that. Obviously, I would also seek to advise the client on how best to protect her interests.

The solicitor, or barrister, cannot be responsible for the client if her visit to him was a sham, and was made for the purpose of eliciting advice or information that might facilitate the carrying out of criminal conduct, and which was reported back to the other party afterwards. That would be a clear breach of the clause. It would take place without the solicitor's knowledge, but the solicitor would still be guilty of a breach of the clause. I accept that in practical reality, it is most unlikely that that information would emerge. After all, legal professional privilege normally means that the information provided in the course of the legal advice would not come to light, and the solicitor might know nothing about what had happened. Nevertheless, there might be circumstances in which the client was subsequently prosecuted, waived the privilege and explained the advice that the lawyer had provided. The lawyer would then be in breach of the clause. That is what the amendment is designed to address.

The amendment is simple, small and—as I hope the Minister will conclude—innocuous. It would rewrites subsection (3)(c) so that it said:

''goods or services provided by a person who knows or suspects that they may help another to carry out criminal conduct is not consideration''.

It would therefore introduce a test of knowledge or suspicion, which would tie in exactly with the test of knowledge or suspicion in clause 331. That would seem to meet the problem, and I find it difficult to see a downside in terms of interfering with the preventive effect of clause 323.

The Minister and I have debated whether the wording should be ''knowing or suspecting'' or ''knowing''. However, leaving that to one side, and addressing clause 323 as it is currently drafted, the amendment would meet the needs of the lawyer who provides advice, as well as those of other categories of individuals who could face similar problems. It would emphasise that people could not be guilty of a breach of the clause if they did not realise that they were helping someone to carry out criminal conduct when providing a service for consideration.

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman's analysis of the effect of the clause is correct—although I wish that the concerns that he and the Law Society have expressed had gone wider than their own profession.

Clause 323 (2)(c) provides a defence for people such as tradesmen who are paid for ordinary consumable goods or services in money that comes from crime;

they are not under any obligation to question the source of the money. Subsection (3)(c) makes it clear that that would not be a defence if goods or services that helped a person to carry out criminal conduct were provided for adequate consideration.

The hon. Gentleman's amendment therefore addresses a useful point, and I acknowledge the role that the Law Society played in persuading him to table it. It highlights the fact that a trader may not always know or suspect that the goods that he provides for adequate consideration may later be used for the purposes of criminal conduct.

The provision is similar to existing legislation, and no problems—such as those that the hon. Gentleman outlined—have so far arisen. However, I acknowledge that a trader might provide for adequate consideration goods that were used for purposes of criminal conduct without having any grounds for knowing or suspecting that that would be the case. In such circumstances the trader would, technically, still fall foul of the possession offence. However, that would not apply in cases of inadequate consideration.

I offer to look into the matter, and to report back on the outcome of my deliberations. We will need to satisfy ourselves that by making an amendment of the kind that the hon. Gentleman has suggested, we do not inadvertently create a loophole that might assist less scrupulous traders. He focused on a specific situation that would affect lawyers, but as I have said, other jobs and professions might also be affected.

Dominic Grieve (Conservative, Beaconsfield)

I hope that I made it clear that I acknowledge that that is the case. It is interesting that it should have been the Law Society that picked up this point. The example that it provided made sense; from the perspective of my professional experience, I could see how such a situation could arise. However, the Minister is right that any innocent trader could be affected if they supplied a service and found themselves unwittingly helping in the commission of crime.

I offer the example of vehicle hire. A person could rent a vehicle to someone and be paid in money that was criminal property. That person could have acted on a bona fide basis even if the van were then used to move the proceeds of crime from point A to point B. Such a person could fall foul of the law—although is unlikely that he would be prosecuted, as prosecuting authorities would exercise their discretion, and it would be glaringly obvious that he had acted innocently.

I have told the Minister many times that unless it cannot be avoided, it is undesirable to enact legislation that criminalises people but then leaves it to the prosecutor's discretion whether to prosecute. As a basic rule, whenever possible we should enact law that criminalises the activity of criminals, not those who are blameless. I am grateful to the Minister for listening to what I have said about the amendment, and for taking my points on board.

In conclusion, I find it difficult to see how anyone in a reasonable environment could say that the amendment had a downside. If it were accepted, prosecutors would have to prove that a person whom they believed to have provided services for a valueless consideration in order to help someone to carry out criminal conduct, knew or suspected what he was doing. If a prosecutor were convinced that a person knew or suspected what he was doing, the burden for the prosecutor would be slightly heavier. However, that burden is one that any right-thinking person would believe that the prosecutor should bear in any case: he should prove that the person knew or suspected that he was facilitating criminality in taking the property for a good consideration. It is difficult to understand how anyone could formulate any proper argument that that should not be done.

I hope that the Minister will accept the amendment or something similar. I shall withdraw it, but I ask the Minister to let us know his decision before Report; otherwise we shall have to return to the subject. I would be grateful—and so would those who are likely to be affected by the issue—if on Report, we could agree an amendment on the subject. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Dominic Grieve (Conservative, Beaconsfield)

We cannot simply leave the clause as it stands without giving further consideration to what it does. Last Thursday, we discussed the state of knowledge required to commit an offence under the clause. In retrospect, I feel that my efforts to draw the Committee's attention to the issue that arose under the clause were diverted, although that was understandable as our discussion was linked to the amendment that would have put the word ''knowingly'' into clause 321.

Yesterday I looked at the transcript of that discussion, and it was glaringly obvious that resources had been heaped on discussing clause 321, while clause 323 had gone by the board. I noted with interest what the hon. Member for Redcar (Vera Baird) said in her important contribution to our debate on Thursday. When pointing out some of the derivation of the legislation, she extolled the Minister as a ''verray, parfit gentil knyght'', and commended him for his reasonableness.

Mark Field (Conservative, Cities of London and Westminster)

As my hon. Friend is making Chaucerian references, which Labour Member does he think would be the Wife of Bath?

Dominic Grieve (Conservative, Beaconsfield)

My lips are sealed on such matters. I would not wish to identify the Wife of Bath among Labour members of the Committee—or from elsewhere in the House. Occasionally names spring to mind—not necessarily Labour Members—but certainly not the name of anyone in this Committee.

The hon. Member for Redcar went to some lengths to emphasise that the changes being made in respect of states of knowledge were, for the most part, beneficial.

When I reread the Bill and its origins in previous legislation, I found it impossible to reach that conclusion.

I now turn to the generality of clause 323. In our previous debate, I said that there was a close relationship between this provision and the offence of handling stolen goods. The more I consider the matter, the more persuaded I am of the closeness of that relationship, although I accept that it is not identical. For example, the scope of this clause is much wider. It deals not only with stolen property, but with the proceeds of crime. Although all stolen property is the proceeds of crime, not all the proceeds of crime are stolen property.

As I said earlier when we discussed the Law Society's amendment, No. 486, under the clause there could be a defence of providing good consideration, which might not exist in relation to stolen property. That is a somewhat recondite point, however, and I am not sure that it will take us much further. However, the clause encompasses the offence of handling stolen goods, plus an extra layer. I think that the hon. Member for Redcar and I agree that the origins of the Bill are the result of a consolidation of measures under the Criminal Justice Act 1988—as amended in 1993—and the Drug Trafficking Offences Act 1986. Section 93B(1) of the 1993 Act states:

''A person is guilty of an offence if, knowing that any property is, or in whole or in part directly or indirectly represents, another person's proceeds of criminal conduct, he acquires or uses that property or has possession of it.''

What is so noteworthy about that provision is that in the amendments that the 1993 Act makes to the Criminal Justice Act 1988, that is the key example of the use of the word ''knowing'' on its own. Whoever drafted the Act in 1993 and followed the then Government's policy—I do not necessarily support every aspect of Government policy in the early 1990s—must have had the specific purpose of inserting the word ''knowing'' in section 93B. That person was happy to use the words ''knows or suspects'' in section 93D and a similar phrase in section 93A.

The hon. Member for Redcar highlighted a distinction in section 93C, which is entitled:

''Concealing or transferring proceeds of criminal conduct.''

She was right to say that the Government have reduced the test that relates to that because it had previously been a negligence test. There was a negligence test under section 93C, which the Minister has altered to a test of knowing or suspecting. That is in sharp contrast with section 93B, which is entitled:

''Acquisition, possession or use of proceeds of criminal conduct''.

That provides for a straightforward knowledge test.

I have not had time to read either the Hansard transcripts of the Committee in 1993, or the then Government's reasoning. I apologise to the Committee for that. Either the Government and the draftsman in 1993 took leave of their senses and were bandying words about—that is unlikely—or there was a background reason why they used a test for the acquisition, possession or use of proceeds of crime that was different from the other tests. With respect to the

hon. Member for Redcar, we did not examine that last week, which is why it is important to consider it now.

Vera Baird (Labour, Redcar)

I, too, have read what I said last week, and I must make it clear that I was addressing primarily clause 321, because we were to consider clause 322 later. I said then that I expected to try to beef up clause 323, but a verray, parfit gentil knyght managed to persuade me that that was not necessary.

David Wilshire (Conservative, Spelthorne)

How many bones were broken?

Vera Baird (Labour, Redcar)

The hon. Member for Beaconsfield is right about the derivation of the test in section 93B(1), but I am not sure why that history is important, bearing in mind what has been done now. Last week the Minister made clear what has happened: the two tests have been put together. The test that I concentrated on was wider, and the other, which the hon. Gentleman forgot to concentrate on last time, was narrower. Now, they are consistent with each other. Is there anything wrong with that?

Dominic Grieve (Conservative, Beaconsfield)

The hon. Lady makes a good point. However, I do not want the discussion to go by default. It seems that there was a purpose behind the test, and I hazard a guess that that was an anxiety about interfering and producing a different test from that for handling stolen goods. The crime of handling stolen goods may be committed in two ways. I fully accept that there seems to be an incompatibility with the second way, which is much closer to the section 93B test, because it is closer to money laundering. I find it extraordinary that a straightforward knowledge test was included when the 1993 Act was enacted. That test is much closer to the straightforward handling of stolen goods. I cannot help but think that that is because there was no wish to create an obvious conflict with a similar offence under which the same activity could be charged, using a different test from that commonly used for the handling of stolen goods. The draftsman may have seen fit to draw a distinction between that and the separate offence of assisting in a dishonest realisation of goods.

Ian Lucas (Labour, Wrexham)

Is not the key distinction between the present offence and the offence of handling stolen goods that one can avoid the present offence by simply making a disclosure? That is where the hon. Gentleman's analogy falls down.

Dominic Grieve (Conservative, Beaconsfield)

I accept that it is possible to avoid the offence by making a disclosure. If someone were to acquire property that they suspected was criminal property, and immediately reported their suspicions to the police, it would be surprising if they were charged with handling stolen goods—although strictly speaking, they might have committed that offence.

Although I understand the hon. Gentleman's point, I do not entirely accept it. I am the first to accept that the legislation was intended to deal with a problem different from that of handling stolen goods—as were the amendments to the Criminal Justice Act 1988. If we went out in the street and asked people to define money laundering, they would mention people who take funny money—in cash, or in a different form—and recycle it so that it becomes legitimate. If we asked

them to explain what is meant by the phrase ''handling stolen goods'', they would refer to people in pubs who trade in illegal videos—or jewels, silver, or whatever. I accept that the thrust of the legislation goes in two different directions.

The hon. Member for Redcar correctly pointed out that there are also analogous provisions in the Drug Trafficking Offences Act 1986. However, drug trafficking offences seldom involve stolen property. They involve the proceeds of illicit transactions in drugs, and that moves them into a completely separate category.

When the draftsmen put the test of ''knowing'' into section 93B of the Criminal Justice Act 1988, they knew what they were doing. However, the Committee is going to get rid of that, because we are insisting on a test of ''knowing or suspecting''.

I want the Government to describe how they foresee the relationship between clause 323 and the offence of handling stolen goods. The Bill does not propose to repeal the relevant section of the Theft Act 1968; that will remain on the statute book. If the Minister were contemplating repealing it, we could have a discussion about that relationship.

With regard to the bringing of prosecutions, people quickly cotton on to the available legislative framework, so it is highly likely that the offence of handling stolen goods will wither on the vine. I have already made that point, but it bears repeating. In relevant circumstances, a prosecutor will tell the Crown Prosecution Service that it no longer needs to use that offence, because someone who handles stolen goods can be charged with acquisition, use or possession under the money-laundering provisions of the Proceeds of Crime Bill, which for a conviction to be secured, require a test to be satisfied that is lower than that for the legislation on handling stolen goods.

It is not unusual for offences to be susceptible to different charges. If someone gets killed on a building site, the person responsible for that site might be charged with manslaughter, or with breach of section 2 of the Health and Safety at Work etc. Act 1974, if the deceased was their employee—or with breach of section 3, if they were not an employee. Alternatively, that person could be charged with a breach of the regulations—although a problem might arise in the Crown Court with regard to the relationship between the regulations and the substantive offence under the Health and Safety at Work Act.

Those offences have different penalties, but with regard to the subject under discussion, it appears to me that there will not be a difference in outcome. That is a key point. We should not muddle the criminal law by adding extra tiers without providing clarification. We have heard endlessly from criminal law review commissions about how Parliament is constantly multiplying the criminal law of this country, and the urgent need for simplification. Indeed, there have been demands for codification of the entire criminal law in a

new compendium, which I would welcome, even though it would take a Committee of the House rather a long time—and I have a horrible sense that I may have just volunteered to serve on it were that to happen.

Such simplification is urgently needed—and now we are creating a duplicate offence with a dissimilar test. I shall listen carefully to the Minister's comments. I have not made up my mind whether I want to resist the incorporation of clause 323 as an issue of principle. I am open to persuasion to leave it in, as it has a great deal of merit and can produce all sorts of good things. However, I hope that the Minister will accept that I am genuinely unhappy. He may have been be commended by the hon. Member for Redcar for introducing consistency between the different clauses in the Bill, compared with the different pre-existing provisions, but that consistency has been produced at the expense of inconsistency with pre-existing legislation. The pre-existing legislation of the Criminal Justice Act 1993 appears so muddled precisely because of the draftsman's anxiety not to stray too far out of line with the offence of handling under the Theft Act 1968—I can think of no other logical reason.

I wait with interest to hear from the Minister. I am sure that he will be a ''verray, gentil parfit knyght'' in this matter, but I say to the hon. Member for Redcar that it is possible to be a verray, gentil parfit knyght and serve a bad master. I suspect that the knight described by Chaucer served King Richard II, who, as is well known, embarked on a period of tyranny during his reign.

Vera Baird (Labour, Redcar)

I think that it is a ''verray, parfit gentil knyght''. The hon. Gentleman must get his quotations the right way round.

I have forgotten what I was going to say—

Nick Hawkins (Conservative, Surrey Heath)

On a point of order, Mr. O'Brien. The hon. Lady was so keen to insult my hon. Friend's lack of knowledge of Chaucer that she forgot what she was going to say.

Dominic Grieve (Conservative, Beaconsfield)

Far from it. The hon. Lady was, properly, so carried away by my literary infelicity that she wished to correct that, and probably nothing else.

Vera Baird (Labour, Redcar)

I have remembered what I meant to say.

The hon. Member for Beaconsfield is mixing this up with the issue of handling stolen goods, but he knows that there are differences, and he has pointed some of them out. There will be some overlap—for instance, in relation to the proceeds of a robbery, if money were involved. I suspect that the application will be only to money in relation to an offence. Will not the interpretation be governed, or at least influenced, by the heading of part 7: ''Money Laundering''? What the hon. Gentleman seems to be arguing—this is where I cannot follow his logic—is that knowing, which is the test in the old law, should be the test in the new law. However, he subsequently agreed that his amendment was inadequate when I was being slightly critical of the intervention by the hon. Member for Henley

(Mr. Johnson), who was supporting the amendment without mentioning anything else.

Both the Conservative spokesmen seem to agree with me that ''knowing'' was an inadequate test. I would have thought that, as a seasoned pair of lawyers, they would recognise the impossibility of being able to apply the word ''knowingly'' in many situations to which the provision ought to apply. I am puzzled as to why the hon. Gentleman suggests that ''knowing'' is the test for handling stolen goods, when the test is much wider—it is knowing or believing, or dishonesty.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the hon. Lady, who makes a good point. Under the Criminal Justice Act 1993, the word used is ''knowingly'', which is the expression that we are trying to reintroduce. That is precisely the test. It is not knowing or believing; it is knowing. I have not heard a detailed critique from the Minister about any difficulty that the prosecution authorities have had in applying it, but he may be able to tell me whether that has happened.

The hon. Lady is right to say that the test is not identical to the one in respect of handling, but it is sufficiently proximate to have removed the anxiety that may have existed at the time. If the phrase ''knowing or suspecting'' was based on different tests, two offences would have been created. In his reply, the Minister may be able to persuade me that I am wrong, and that either the draftsman in 1993 did not know what he was doing, or there is a different explanation of why the different tests were introduced. That subject merits care. There is much to be said for trying to introduce conformity throughout the Bill, but we must be mindful of the knock-on effects of our decisions. I wait to hear the Minister's reply.

Bob Ainsworth (Labour, Coventry North East)

Listening to the hon. Gentleman, I understand with clarity why litigation costs so much. We spoke for almost a whole day about certain issues. If he was diverted from his argument, that was because the Opposition proposed two separate arguments. I alluded to that when I said that the hon. Member for Surrey Heath (Mr. Hawkins) was blunt and clear, while the hon. Gentleman's own argument was more circumspect. We were talking about two amendments, and it was clear that the main worries of the hon. Member for Beaconsfield were about clause 323. However, the hon. Member for Surrey Heath did not share his aim of narrowing some of the arguments down, and majored on clause 321.

I was surprised that the amendment tabled to clause 321 was pressed to a Division. I was even more surprised that the Liberal Democrats, having supported that amendment, today voted against the amendment tabled to clause 323. That was astonishing.

Nick Hawkins (Conservative, Surrey Heath)

I believe that the Minister has been in the House as long as I have, so he should never be surprised when the Liberal Democrats do something totally inconsistent with what they did five minutes ago, or even five seconds ago.

On a serious point, the Minister should understand that, just as he shares his work load with his hon.—and equally able—Friend, the Minister of State, I

share the work load with my hon. Friend the Member for Beaconsfield. I make my points in my usual blunt fashion—as I said last week, I take that as a compliment—and my hon. Friend refines and extends the argument. That does not mean that our arguments are inconsistent with each other, but that they have several parts, which apply to different sections of the Bill.

Bob Ainsworth (Labour, Coventry North East)

I am not so sure about that. I do not believe that the differences were presentational. They were more substantial than that.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

As the Minister has chosen to highlight the fact that I voted for the first amendment, I must point out that I abstained from the second vote.

Bob Ainsworth (Labour, Coventry North East)

That is what I said.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

No, the hon. Gentleman said that I voted against the amendment. It is reasonable to point out that, given that the first vote was lost, I did not understand why a second Division was held, which is why I abstained. There is nothing unusual about that. It is unhelpful for the Minister to proceed in a partisan way.

Bob Ainsworth (Labour, Coventry North East)

I apologise. If I suggested that the hon. Gentleman voted for and then against, I did not mean to—but how he justifies his support for the amendment to clause 321, which was tabled by the Conservatives, followed by abstention on the amendment to clause 323, I do not know. I cannot see the logic of that.

One of the main arguments of the hon. Member for Beaconsfield is that he cannot believe that there was not a genuine reason for the way in which the Bill was drafted. When Opposition Members examine Bills, they consider the draftsman to be perverse and tyrannical. However, when those on the Government Benches consider proposed legislation, they believe that the draftsman must obviously have had a genuine reason for the drafting. That is probably a fault of parliamentarians, not draftsmen.

Dominic Grieve (Conservative, Beaconsfield)

We have established the common ground between us. Last week the Under-Secretary said—and I am sure that he is right—that the draftsman enacts policy into Bills, so he cannot be blamed. The person who can be blamed is the one who made the Government's policy decisions, which required the draftsman to perform convolutions. Much of the material that was drafted under past Conservative Governments I do not find any more commendable than what comes from the present Government. I am willing to be impartial in such matters.

Bob Ainsworth (Labour, Coventry North East)

I do not want my hon. Friend the Member for Redcar, or any other member of the Committee, to detract from, or cast aspersions on, the gallantry that she showed me the other day. It was one of the nicest things that has ever happened to me, and I do not want anyone to row back from it.

We have had a long discussion on the clause. I do not want to delay the Committee, but the hon. Member for Beaconsfield rightly acknowledged the

overlap, and the fact that some of its provisions existed elsewhere, too. I accept that there is a good deal of overlap between the two offences. Section 22 of the Theft Act 1968 states:

''A person handles stolen goods if (otherwise than in the course of stealing) knowing or believing them to be stolen goods he dishonestly receives the goods or assists in their retention, removal, disposal or realisation by or for benefit of another person, or if he arranges to do so.''

For our purposes, the similarity with that offence and the clause before us is the fact that it is an offence merely to receive stolen goods, knowing or believing them to be so. It is therefore true that the receiver of stolen goods will commit the clause 323 offence as well as the offence under section 22 of the Theft Act. The penalties for both offences are the same. On indictment for either offence, a person is liable to a maximum period of imprisonment of 14 years.

There are many examples in United Kingdom law of conduct that falls under overlapping offences. The hon. Gentleman suggested that that occurs only when the penalties are different. I am not sure that that is so. [Interruption.] I think that he agrees. He knows that the measures under the Bill are not massively different from what applies in other areas of the law. Whether a person is charged with one offence or another, or both, will depend on the circumstances. Under present circumstances, whether a person is charged with one or the other offence, or both, does not seem to matter a great deal, because the maximum penalty would be the same.

The more pertinent question is whether there is a continuing need for section 22 of the Theft Act, when the clause captures the same conduct. It is said that a prosecution is much more likely under the clause than under section 22, especially given that the prosecution would only have to establish a mens rea element of knowing or suspecting that the items were stolen goods rather than the actual knowledge or belief, which would be a tougher test.

In defence of section 22, the handling offence is well established and works well in conjunction with the offence of theft to ensure that those who steal and deal in stolen property are appropriately penalised. We need clause 323 because it is much wider than the handling offence and covers any benefit gained from crime, not just stolen goods. For example, the clause would take in the profits of drug dealing, prostitution, video piracy and many other things that the handling offence does not cover. We cannot make a distinction between the proceeds of theft and other crimes, because that would require us to establish the predicate offence that had created the funds that were being laundered.

The differentiation in the current legislation between drug trafficking and other crimes has given rise to difficulties. Some money launderers are escaping conviction because the prosecution are unable to establish precisely what kind of criminal conduct gave rise to the funds in question. It should be enough that the prosecution can establish that

property is the product of some sort of criminal conduct.

More importantly—although the hon. Member for Surrey Heath will probably disagree—we need to include all conduct under the clause in order to fulfil our international obligations. I refer hon. Members to the EC money laundering directive of 1991, the Council of Europe convention on laundering, search, seizure and confiscation of the proceeds of crime, and the 1988 Vienna drugs convention, all of which require the inclusion of possession, acquisition and use of criminal proceeds in legislation as part of a country's commitment to criminalising money laundering.

I cannot accept that the conduct mentioned in the clause should be reduced to ''knowledge or belief'', as the hon. Member for Beaconsfield attempted to argue in a previous sitting.

Dominic Grieve (Conservative, Beaconsfield)

If that is correct, presumably the Minister is saying that those who drafted the amendments to the Criminal Justice Act 1988, which I assume was amended partly because of the EC directive of 1991, failed to do the job properly. As we discussed earlier, the Criminal Justice Act 1993 uses the word ''knowing''. I am surprised at the Minister's comments. The last Conservative Government were not generally found wanting in their desire to crack down on crime, yet he seems to suggest that they did not implement the directive properly, as they used ''knowing'' rather than ''knowing and suspecting''.

Bob Ainsworth (Labour, Coventry North East)

I do not know the details about that. The hon. Gentleman has read Hansard, as he readily acknowledges. I congratulate him on the work that he has done in digging out the background to the existing legislation. I do not know exactly what the motives were for the way in which the 1993 Act was framed.

We have considered our international obligations and believe that the provisions are necessary in order to meet them. We also believe that we have included the appropriate tests. It is no good looking back at what was the case previously. Surely we need to examine the matter in its setting, and to consider the problems that we face today. We must decide what measures are justifiable and necessary in order to tackle those problems.

It is all very well for the hon. Gentleman to quote selectively from past Acts, but on every occasion he and his colleagues have attempted to make the prosecutor's burden more difficult, not less. I ask him to use practical argument not only to consider what has happened in the past but to justify making that burden more difficult in the present. Our international obligations are fairly loose on the question of how the mental element is to be incorporated in law as regards possession. It is left to countries to include such provision in accordance with their legal principles and constitution. However, clause 323 is needed if we are to meet our obligations and if those obligations do not dictate to us what should be the burden on the prosecution with regard to the offences under the clause.

There is an overlap, but it is not unusual for such overlaps to exist. Prosecutors might ask why someone

is not pursued under this legislation, rather than under a previous Theft Act, but that Act should not be removed from the statute book, as it is well used, and it is highly appropriate in the circumstances that often apply. There is no reason in principle to make the prosecution's case more difficult, just because of the overlap that the hon. Gentleman has identified.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister for that full explanation. I make no criticism by noting that we remain none the wiser about why those interesting distinctions were introduced in amendments to the 1988 Act. We would have to go to the Library and dig out old Committee Hansard reports to be further enlightened about that.

With regard to those distinctions, it is clear that the draftsman was looking at issues that arise in each clause differently, even if they were intended to cover a series of offences. The Minister has chosen a different approach—a consistent test approach—in the clauses that we are debating, with the exception of clause 324 where, interestingly, the he has chosen a different test. I suspect that that will be the subject of lengthy debate when we come to discuss that clause. The priorities have been reordered.

The attempt by my hon. Friend the Member for Surrey Heath and me to get the Committee to accept a different test of ''knowingly'' has failed, but I do not wish to be seen as attempting to wreck clause 323. It is a valid clause, and I do not want it to fall by the wayside, so I will not oppose it, but I hope that when the Bill reaches another place those who are—perhaps—better versed in the law than we are will consider the matter. I am concerned about the plethora of alternative offences that are punishable with the same maximums and yet have a different test applied to them.

I do not share the Minister's confidence that there will not be a change in the way in which prosecutions are brought. In the ordinary course of events, it is inevitable that prosecutors will follow the line of least resistance and prosecute under part 7, because it has a lesser test. That might well happen—indeed, I would do it myself if I were in that position.

An odd anomaly is developing, but previous draftsmen have attempted to keep the two offences—handling stolen goods, and acquiring, using or having possession of criminal property—along the same tracks.

I would like the Minister to go away and canvass his officials again, as I suspect that he might have to do that when the Bill goes to another place, even if he does not have to do that here. He has acknowledged that there are different tests, which we will address when we consider clause 324. I continue to worry about the matter, but not to the extent that I wish to prevent the clause from standing part of the Bill.

Question put and agreed to.

Clause 323 ordered to stand part of the Bill.

Clause 324 - Failure to disclose: regulated sector

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 487, in page 187, line 27, leave out from 'suspects' to end of line 28.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take amendment No. 524, in page 187, line 28, leave out 'suspecting' and insert 'reasonably believing'.

Dominic Grieve (Conservative, Beaconsfield)

We now come to one of the central issues of part 7. The clause provides for the serious offence of failing to disclose in the regulated sector. It states:

''(1) A person commits an offence if each of the following three conditions is satisfied.

(2) The first condition is that he—

(a) knows or suspects, or

(b) has reasonable grounds for knowing or suspecting,

that another person is engaged in money laundering.

(3) The second condition is that the information or other matter—

(a) on which his knowledge or suspicion is based, or

(b) which gives reasonable grounds for such knowledge or suspicion,

came to him in the course of a business in the regulated sector.

(4) The third condition is that he does not disclose the information or other matter to a constable, a customs officer or a nominated officer as soon as is practicable after it comes to him.''

Last week, the hon. Member for Redcar alluded to the fact that we are introducing a criminal offence that is founded on negligence. Instead of a subjective test of the state of mind of the person who commits the offence, the court's test is whether a person should have had reasonable grounds to know or suspect that another person is engaged in money laundering. Therefore, it is possible for a person to be convicted of the offence although he could satisfy the court that at no time did it cross his mind that he was dealing with money laundering that should have been reported.

It is also noteworthy that the provision is a clear departure from the previous regime that operated under the Drug Trafficking Act 1994. Section 52 of that Act states:

''A person is guilty of an offence if . . . he knows or suspects that another person is engaged in drug money laundering,''

and

''the information, or other matter, on which that knowledge or suspicion is based came to his attention in the course of his trade, profession, business or employment''.

For an offence to be committed under the Act, a defendant must know or suspect that another person is engaged in drug money laundering. That is the very test that applies to other criminal offences in part 7, but for the offence under clause 324 the Minister is happy to move to a negligence test. The only other difference between the 1994 Act and the clause is that the Act applies to trades and professions, while the clause applies to the regulated sector.

The size of the regulated sector and the nature of the crime do not make me believe that a different test

would be fair on the basis that if a person is in the regulated sector, he jolly well ought to know certain information. It is worth pointing out that, as the Bill is drafted, a person in the regulated sector may range from a partner in a senior firm of solicitors or the director of a major banking enterprise down to the most junior member of staff, who could be jailed for five years for failing to report actions that did not appear suspicious until viewed with the benefit of hindsight.

Those of us who practise in the professional sphere know all too well how easy it is, in the course of our work, to miss things. Fortunately, 99 per cent. of the time, it is without consequence. However, when there is a consequence, which sometimes happens to colleagues, I have considerable sympathy for them. The transformation of such a situation from one in which a negligence claim might be attracted into one in which a person may face five years' imprisonment, fills me with horror. The amendment would ensure a much fairer system, which would command much wider public approval and support if the test of knowing or suspecting were introduced.

That is a simple introduction to the amendment, but it is an enormous topic.

I want to hear from the Minister the administrative, legal or public policy justification for creating an offence of negligence of such seriousness. We are not talking about minor offences in administrative law. Anybody looking at this part of the Bill would consider that somebody who had breached the clause would be committing a very serious offence. We must assume that that is the case because we are not talking about a rap over the knuckles or a fine—potentially, we are talking about a long period of imprisonment.

The Committee could regard amendment No. 524 as an add-on or an alternative—I emphasise that it had not even been selected last week, and I am grateful that it has now been selected—but my preference would be for amendment No. 487, which deletes all reference to reasonable grounds for knowing or suspecting, and establishes the offence fairly and squarely on the basis of a state of guilty knowledge in respect of the person in the regulated sector who fails to make the necessary disclosure when he knows or suspects that money laundering is taking place.

Bob Ainsworth (Labour, Coventry North East)

We had a long debate last Thursday on the various permutations of the state of mind or mens rea element that would apply to part 7. Through tabling amendments Nos. 426 and 428, the hon. Member for Beaconsfield sought to change the mens rea element in clauses 321 and 323 from knowing or suspecting that a property was derived from criminal conduct to knowingly committing the offences. He made it clear—if he did not do so in what he said, he did so when he voted—that his objective was to remove the element of suspicion from those offences.

During that debate, my hon. Friend the Member for Redcar pointed out that the wording of clause 321 would narrow the existing offence of concealing the proceeds of crime, because the mens rea element was

one of having reasonable grounds to suspect, rather than of suspecting. In passing, I should note that she was correct, and I agreed with her that that was the case, so she was right to draw it to the Committee's attention. The activities in that offence must also be shown to have been committed for the purpose of avoiding prosecution or the making of a confiscation order. The present offence is not as wide as we might at first think, even though the objective test of having reasonable grounds to suspect applies. After a long debate, I am sure that the Committee is now clear that the principal money laundering offences under clauses 321 to 323 apply to everyone, not only the regulated sector. The failure to disclose offence under clause 324, which has been mentioned during our discussions, applies only to the regulated sector.

I return now to the amendments, and particularly the negligence test in the failure to disclose offence under the clause. As drafted, the failure to disclose offence would be committed when a person knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering, and the information came to him in the course of conducting his business in the regulated financial sector, but he did not disclose it to a constable, a Customs officer or a nominated officer. There are several options that one may choose in respect of a mens rea element that might be applied to such an offence. Obviously, the top of the range is actual knowledge, which is the stiffest test that may be applied. That is followed by certain other subjective tests, such as believing or suspecting, after which there may be objective tests, such as having reasonable grounds to know or believe, or reasonable grounds to know or suspect.

The amendment would retain the subjective test of knowledge or suspicion of the offence. Where the Opposition part company from the Government's position is that they want the test of having reasonable grounds to suspect to be either deleted or at least raised so that the offence can be committed only under the second limb where there are reasonable grounds for knowing or reasonably believing. The test of suspicion would be removed from that limb. That represents yet another attempt to water down the effect of part 7 and our ability to apprehend those who assist others to launder the proceeds of crime.

In response to amendment No. 487, we consider that an objective test is necessary because we want the financial industry at large to be much more diligent in identifying and reporting instances of money laundering. It is already the test for the requirement to disclose information on transactions relating to terrorism. The relevant provision can be found in the provisions inserted into the Terrorism Act 2000 under schedule 2 to the Anti-terrorism, Crime and Security Act 2001.

The test of reasonable grounds or suspicion will apply only to the regulated sector. It will not apply to the public at large. It is right that such a test should be imposed on the regulated sector because the public have a right to expect that that sector, which is best placed to identify money laundering, should be placed under a greater duty of diligence in detecting it. It is

important that measures are in place to deal with wilful blindness. The amendment would remove that.

Nick Hawkins (Conservative, Surrey Heath)

Is the Minister seriously suggesting that the reputable banking and legal community in places such as the City of London is not already complying with its duty to report? Last week, I urged him to use the past few days to try to get an indication of how many reports have been made on the NCIS forms. I do not know whether that research has been done. Our information shows that many reports are made but NCIS does not respond to them, which leaves transactions in limbo. He has not dealt with that point.

Bob Ainsworth (Labour, Coventry North East)

I did try to tell the hon. Gentleman that we must think seriously about the matter. I am not criticising current institutions at all because I know how difficult it is in a competitive world for anybody to try to raise standards, at a cost that is not borne by competitors. When we try to make effective money laundering regulations, we must decide the minimum standards. That applies to other areas, such as safety at work and employment regulations, and training provisions. It is extremely difficult for individuals to say, ''Ah well, we don't care about the requirements of the law. We're going to do something more than that, although it may cost us and give other people a competitive edge.''

Nick Hawkins (Conservative, Surrey Heath)

The Minister is quite right that Parliament is doing its job. That is why this debate is important, as my hon. Friend the Member for Beaconsfield said. If the Minister says that the institutions are not complying properly with the system at present—he said in terms that he makes no criticism of that—it is difficult for him to say that we must impose greater obligations on them. The system is working well at the moment, as he freely concedes. There is no need for greater provisions.

Bob Ainsworth (Labour, Coventry North East)

What I said does not indicate that the system is working well, or as well as we want. In our previous debate, I said that we want to raise standards considerably. When faced with the problems that exist in our modern society, sadly, we must do that. That is my view. I wish that the situation were different and that we had levels of organised crime facilitated by money laundering that were such that we need not give great consideration to these matters and could allow a laxer regime that had no consequences on society—but that is not the case. We must examine a serious problem and consider how appropriate any measures are. That is what we are discussing, is it not?

Nick Hawkins (Conservative, Surrey Heath)

Yes it is, but he and I may reach a different judgment—that is what Parliament is all about.

The Minister said that the system may not be working as well as he and the Government would like. Both last week and today, I suggested that the only aspect of the system that does not work properly is NCIS's responses. The institutions send in reports but NCIS does not respond in due time, which leaves the institutions in limbo.

Bob Ainsworth (Labour, Coventry North East)

I do not know whether the hon. Gentleman believes that.

Nick Hawkins (Conservative, Surrey Heath)

I do.

Bob Ainsworth (Labour, Coventry North East)

If he does, I do not know whether he heard all or part of what my hon. Friend the Member for Glasgow, Pollok said the other day. As far as I am aware, the main problem in the Abacha case was not that NCIS did not act on reports that were made to it, but that there was clear evidence of money laundering, in retrospect, although no reports were made. If, despite such evidence, the hon. Gentleman says that his party considers that there is no need to examine whether the current standards and regulations are competent and effective to deal with the problem, so be it. We do not share that view. Evidence exists that the reverse is the case—there is a real need to raise standards in that area, and only Parliament can do it; individual institutions cannot.

Nick Hawkins (Conservative, Surrey Heath)

I accept that Parliament must come to a view. I listened to every word that the hon. Member for Glasgow, Pollok said last Thursday afternoon—he was only delayed by a minute in joining the Committee this morning, but he missed my praise of him, so he will have to look at Hansard to see what praise I lavished on him in his absence.

The Minister will understand that the reason why my hon. Friend and I keep returning to this point is that we are told, as a matter of great importance, by the Law Society of England and Wales, and by the committee that specialises in the matter, that precisely what we are saying about transactions in limbo is happening, and not just on a one-off basis. As to whether we really believe it, we do, because we are told by experts at the sharp end that that is what is happening, not just once or twice, but repeatedly.

Bob Ainsworth (Labour, Coventry North East)

I do not accept that. We have discussed with NCIS in detail how it deals with the current situation, how it would like the legislation to be structured, and its capacity and ability to deal with an increase in reports. It has told us—if the hon. Gentleman is prepared to ignore its advice, so be it—that it wants those reports to come in. He says that he has evidence that there are thousands upon thousands of reports.

Nick Hawkins (Conservative, Surrey Heath)

I did not say thousands.

Bob Ainsworth (Labour, Coventry North East)

Well, there are thousands. Let us admit that. I do not know whether that is considered excessive, but I am told that about 18,000 reports of suspicious transactions are made to NICS every year. I am also told that, looking back on those figures, that number has not risen for almost a decade. That may appear to be a lot of reports, but when one considers the size of the regulated sector and the scale of banking and financial activities in this country, I am not sure that the amount is as massive as he is trying to paint it.

Paul Stinchcombe (Labour, Wellingborough)

I wonder whether I could move the Minister on to the negligence aspect of the provision. Those reports that have been made to NCIS can have been made only when the person reporting the incident knew or suspected. If the person did not know or suspect, even if there were reasonable grounds for such knowledge or suspicion,

he would never be in a position to report. If he does not report, because he does not know or suspect, does that not amount to a reasonable excuse for not disclosing the information under subsection (5)?

Bob Ainsworth (Labour, Coventry North East)

Let me move on through the issues and establish whether we have covered all the points to the Committee's satisfaction.

Before the hon. Member for Surrey Heath intervened, I was saying that the Government believe that measures must be in place to deal with the issue of wilful blindness of employees when the Bill applies only to the regulated sector.

Dominic Grieve (Conservative, Beaconsfield)

This is the second time that the Minister has used the expression ''wilful blindness''. Of course, such matters are of fact or degree. However, if somebody is wilfully blind, I would expect him to be guilty of the offence, even if the amendment was made. The court would conclude, on the evidence, that the person did suspect that money laundering was taking place, because he exercised his will in blinding himself to it. It is an unfortunate expression, as I would regard someone who is wilfully blind as being more than negligent.

Bob Ainsworth (Labour, Coventry North East)

That may be so. We are talking about the burden of proof that is required, and the ability to prove the case. The hon. Gentleman probably understands the subject better than I do.

It is relevant that, since 1993, regulations have been in place that require all bodies that carry out financial business to be particularly alert to money laundering. The regulations require them to appoint dedicated money laundering reporting officers, and to have in place systems of training to teach employees that enable them to be aware of, and to report instances of, money laundering.

For several years, the industry has produced its own guidelines to aid employees to recognise suspicious transactions. The Bill builds on that: after it is enacted, the court will need to have regard to whether an employee followed any relevant guidance. Such guidance will need to be approved by the Treasury before it can be taken into account, and we intend that it should include information and examples with regard to what may constitute reasonable grounds for suspecting that someone is engaged in money laundering.

One of the key criticisms about the offence has been that it will bite not only on senior professional people and experienced staff, but on junior employees, and possibly on persons who are untrained or who are short-contract agency staff. It has also been put to us that such personnel are often hard-pressed, on low salaries and subject to internal financial targets. It has been argued that banks, rather than employees, should be penalised, and that employees should be penalised through internal disciplinary measures, rather than be allowed—potentially—to fall foul of the criminal law.

Those are serious issues and we have not skirted around them. We have addressed them carefully. We have received representations about them from a range

of organisations such as financial institutions and trade unions. However, money laundering is a very serious matter, and we must not lower our defences or limit our capability of identifying incidences of it: on the contrary, we must strengthen our defences, and clause 324 is intended to achieve that.

All personnel who are placed in situations where there is a risk that they will come into contact with money that is being laundered should not be placed in such a position until they have been properly trained. The 1993 regulations already require that; it is a criminal offence for financial institutions to fail to train their staff. However, we do not believe that the Crown Prosecution Service will want to pursue cases against junior employees when it is clear that the more senior staff in a financial institution are at fault. Much will depend on the circumstances of each case, both in respect of decisions that are made about whether to prosecute and, if prosecution is taken forward, the extent to which a person is liable, taking into account any guidelines which might have been issued.

The Government have not approached this new test in a cavalier manner. On the contrary, I assure Committee members that we have given careful consideration to the inclusion of the new test of reasonable grounds to know or suspect, and we think that is it is fully justified, given the climate in which we are living.

We have also looked at whether it is practical to limit the categories of people within financial institutions to whom it can apply. It is front-line staff who will have the relevant information. They are the people who are interfacing with the accounts, and they will notice suspicious transactions. I would be comfortable if we could define categories of staff, but we would have to be able to do so without punching a hole in the effectiveness of the provision.

Amendment No. 524 has been tabled as an alternative to amendment No. 487. I cannot recommend that the Committee accept it. Under Amendment No. 524, a person would commit an offence if he had reasonable grounds for knowing or reasonably believing that another person was engaged in money laundering. As I have already said, we think that the financial sector should be vigilant. We want to catch not only those who should have known that money laundering was going on but those who should have suspected it.

As far as ''reasonably believing'' is concerned, leaving aside the drafting oddity of having the test of reasonableness appear twice in a sentence, it would be hard for a person or a court to judge what constituted a reasonable belief. Amendment No. 524 would have two negative effects: it would place an additional burden on those in the regulated sector who have to make reports, and it would make it more difficult for the courts to secure convictions.

We have brought together the level of proof required for those offences that apply to everyone, both in the financial sector and beyond. After much reflection, we still believe that the public are entitled to expect greater vigilance from those in the regulated

financial sector—I know that it is not a narrow sector, and that many people are involved in it—and it is therefore appropriate to have a different test. That is the basic case for why we have structured the Bill that way and why I cannot accept amendment No. 524.

Paul Stinchcombe (Labour, Wellingborough)

Will the Minister answer the question that I asked him earlier: how could someone disclose information if he did not know or suspect it to exist? If he cannot disclose information, as he has no knowledge or suspicion of it, why is it not reasonable for him not to disclose it?

Bob Ainsworth (Labour, Coventry North East)

If that person does not know anything, he cannot disclose anything. However, what if someone has guidance on how he should do his job and on the vigilance that he should apply, but he ignores that guidance and so fails to notice and report a suspicious transaction? Are we saying that we should accept that he has a defence, and that under no circumstances can he be prosecuted? I should think that, as guidance had been issued, a level of conduct is to be reasonably expected of him because he works in the financial sector. It should be no defence that he did not follow the guidance and failed to report money laundering when he should reasonably have suspected that it was occurring. The authorities should be able to consider whether to prosecute such a person.

Paul Stinchcombe (Labour, Wellingborough)

I am obliged to the Minister for that helpful answer. I appreciate the force of his arguments in favour of creating an offence of negligence. I am worried about creating two offences within a single clause: one of knowledge and suspicion and one of negligence. Both offences require that three conditions are satisfied, but under the second offence, the third condition can never be satisfied.

Bob Ainsworth (Labour, Coventry North East)

I am not sure of the point that my hon. Friend is making, but if he is worried, let us continue with the debate. We are saying that people working in that sector should potentially be subject to prosecution if they should have had reasonable grounds to suspect a suspicious transaction and fail to report it. If an employer fails to provide proper notice to employees of the guidance under which they were reporting, that employer is guilty. In such a case, the standards of the employer would need to be raised. However, when it is clear that an employee operated outwith that guidance, the prosecution should be able to bring a case against him.

If a person can show that he neither knew nor suspected that a transaction involved money laundering and that he was operating within his understanding of the guidance, that would be a defence. In all probability, that would deter the prosecution from making a case against that person, and instead the person who was responsible for that front-line employee's lack of knowledge might be pursued. My hon. Friend is saying that that is unreasonable, and that we should not expect people to apply themselves in that way.

Paul Stinchcombe (Labour, Wellingborough)

I am not saying that. The Minister may have a good case for creating an offence of negligence. My point is that two separate offences should be created under two separate provisions: that of knowledge or suspicion and that

of negligence. Including the offence of negligence under the same provision requires satisfying a third condition that can never be satisfied.

Bob Ainsworth (Labour, Coventry North East)

Is this to do with the way that the Bill is drafted?

Paul Stinchcombe (Labour, Wellingborough)

It is a drafting point.

Bob Ainsworth (Labour, Coventry North East)

Right. I understand that my hon. Friend believes that the provision could be made clearer if it was drafted in another way.

Paul Stinchcombe (Labour, Wellingborough)

The third condition deals with a person who has not disclosed information. A person can never disclose that information if he does not know of, or suspect, its existence. The provision makes sense only if a person's lack of knowledge or suspicion does not amount a reasonable excuse under subsection (5)(a). It strikes me that, ordinarily, such lack of knowledge or suspicion would be a reasonable excuse not to say something.

Bob Ainsworth (Labour, Coventry North East)

I am more than happy to look at whether the provision can be drafted in a way that makes it clearer, and I give my hon. Friend a commitment that I will look into that matter.

Mark Field (Conservative, Cities of London and Westminster)

Dare I say that the hon. Member for Wellingborough (Mr. Stinchcombe) has hit the nail on the head? That shows the draconian nature of the provisions. I presume that the Government's intention under subsection (5) is that a person who has no knowledge or suspicion about a particular case of money laundering, but who could reasonably be expected to know about it, would be perceived as not having a reasonable excuse for not making the disclosure. That is absolute nonsense in any normal use of the English language. However, it is evident that the Government intend that not knowing will not be accepted as a reasonable excuse for not disclosing.

Bob Ainsworth (Labour, Coventry North East)

I am not trying to be obscure, and I do not believe that the hon. Gentleman is making the same point as my hon. Friend. If he is, no doubt he will clarify that matter. Let me explain the provision, and I am sorry if the hon. Gentleman thinks it draconian.

We are not advancing the proposition that not suspecting is a reasonable defence. A negligence test should be applied to the regulated sector. It would be possible for a prosecution to be brought against someone whereby it was said that it was reasonable to suspect money laundering and that the particular individual should have known. He should not have an automatic defence of saying, ''But I didn't suspect.'' We do not accept that such a statement should be a defence. There should be a negligence test that requires people to be trained in the appropriate measures and to be mindful of the guidance in how they undertake their job. When there are reasonable grounds to suspect that a particular transaction involves criminality, they are potentially at risk of breaking the law if they do not disclose it.

Vera Baird (Labour, Redcar)

I am anxious to receive some information so that I can fully understand the clause. The Minister has accepted that there will not be a defence under subsection (2)(b) that the person did not know. Those involved might not know or suspect, but

they would still be guilty. It would not be a reasonable excuse that they did not know. It was almost suggested that the defence under subsection (5) could be used if a person followed the guidance referred to under subsection (6). However, a person may have followed the guidance but, because of carelessness or a preoccupation, still failed to see what was happening. Following guidance is not a defence: it is only practice to be taken into account.

Bob Ainsworth (Labour, Coventry North East)

It is not an absolute defence—that is right—but the factor to be taken into account in the defence is if the person said that, in doing his job, he was mindful of the guidance and applied it. I accept that it would not defend the person in all circumstances. The provision is worded as it is intentionally.

Stephen Hesford (Labour, Wirral West)

With respect to my hon. Friend the Member for Wellingborough, I think that he has misunderstood subsection (4). He said that the third condition could not be satisfied if the person did not know about the money laundering. The person will have the physical information, but the fact that he did not realise that such information conveyed something in particular is not relevant. He should have realised what it meant, so he will have the information that he should have disclosed. It is not as though the person would never have had the information, but he may not have realised that he had it, so he will be prosecuted for that failing.

Bob Ainsworth (Labour, Coventry North East)

Potentially, I am in trouble. Lawyers are at every corner. They are about to start arguing.

Nick Hawkins (Conservative, Surrey Heath)

Will the Minister give way?

Bob Ainsworth (Labour, Coventry North East)

No, I will not give way. I am not so sure that my hon. Friend the Member for Wirral, West (Stephen Hesford) can dismiss the argument of my hon. Friend the Member for Wellingborough. Of course, the person will have a lot of information in front of him. It will mainly be about financial transactions that are about to happen. The matter is about whether he should have identified and reported a suspicious transaction.

Paul Stinchcombe (Labour, Wellingborough)

The infelicity of my argument was when I said, ''can never be satisfied.'' I meant, ''will inevitably be satisfied.'' The person can never disclose the information because he does not realise its importance or significance. That is my point, but I used the wrong word.

Bob Ainsworth (Labour, Coventry North East)

The person obviously has the information passing through him. The question is whether he identifies that information and reports it as suspicious in the way in which we expect.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

I hope that the Minister will not be too soft on this matter and will not be tempted to make unnecessary concessions. I hope that he will remember that enormous sums may be involved in these crimes, and many ingenious minds will look for loopholes in order to avoid prosecution and punishment. I hope that he will not accommodate

some members of the Committee by making concessions that would make criminals with white collars more likely to avoid prosecution.

Bob Ainsworth (Labour, Coventry North East)

I do not disagree with my hon. Friend. That is the precise dilemma with which the Committee must wrestle and with which I have wrestled for the past few months. Not only lawyers—I do not say that because of my hon. Friend's huge prejudice against lawyers as a breed—have made representations about the matter. All financial institutions have raised concerns, as have some trade unions that represent the institutions' staff. We should think seriously before we put people in these potential situations, but we have little choice but to do that if we want standards to be raised to the level that we want. As I said, companies are already under an obligation to train their staff and bring them up to requirements. Some companies have done that admirably, while others have not.

Should we be happy to stay broadly as we are and hope that other measures will be effective in reducing the problems of money laundering and associated organised crime? Alternatively, do we need a real change in the standards that apply? We must wrestle with that problem and consider whether the powers will be justified.

Dominic Grieve (Conservative, Beaconsfield)

Let me make two points to the Minister. First, will he consider the position if the amendment were accepted? Sometimes, I get the impression that he thinks that that would mean that no prosecution could ever succeed. I think the contrary. Every day of the week, juries must decide whether a person knew or suspected something. It is unreal to suggest that securing a conviction would be an insurmountable obstacle, especially given the guidance rules that the Minister intends to introduce. I think that people would be convicted.

Secondly, the Minister mentioned that 18,000 disclosures a year occur at present. However, only 100 prosecutions a year arise from those disclosures. There is not a paucity of disclosure in respect of enforcement proceedings that are taken at present. It has also been suggested to me that the current rate of disclosure is higher than 18,000 a year. Can he confirm the current rate before the end of the sitting?

Bob Ainsworth (Labour, Coventry North East)

If the hon. Gentleman has information that counters mine, he had better tell us where it comes from. My information is that the disclosure rate was running at 18,000 a year up to 2000, which is when the last viable figures were published. Those figures run back to 1993.

Nick Hawkins (Conservative, Surrey Heath)

The Minister challenges us to say where our information comes from. He will realise that experts at the sharp end are following carefully our proceedings from beyond the Bar. I do not wish to be disrespectful to him, but it has been put to us that the position that he has set out in his initial remarks is ''absolute nonsense''. He suggested that the incidence of reports had remained static for decades. In fact, the graph shows a dramatic rise since 1993; roughly 30,000 last year; a huge rise since 11 September; and probably 40,000 next year, even if the law does not change. The real problem is the disparity between the number of

reports and the number of prosecutions—of which there have, perhaps, been under 100. That clearly demonstrates that the current situation does not justify the Minister's position.

Bob Ainsworth (Labour, Coventry North East)

When someone wants to say something really derogatory, they always begin by remarking, ''I do not want to insult the Minister in any way.''

The hon. Gentleman is saying that there has been a big increase in reports of money laundering since 11 September, and that that punches a hole in my argument. Well, my, my. If his case rests on that, it will not stand up to scrutiny, and there is no need to address it in detail.

People have been made ultra-alert about money laundering by the massive press coverage of the links between terrorism and organised crime since the events of 11 September. The general public, as well as people who work in the financial sector, have learned about it, and that has led to a substantial increase in reports of money laundering. If that had not been the case I would have been very surprised, and so would the hon. Gentleman.

However, if the hon. Gentleman is saying that there has been a steady increase in reports throughout the 1990s, that does not tally with the information that I have received, which indicates that the numbers were steady until 2000 but that, as one would expect, there has been a substantial rise in the past year.

Nick Hawkins (Conservative, Surrey Heath)

I made it clear that I was quoting the Law Society of England and Wales, because it represents the experts who operate at the sharp end. It states that since 1993 there has been not merely a steady rise, but a dramatic rise in reports of money laundering. It describes the Minister's suggestion that the figure had remained static for decades as absolute nonsense, because it is not borne out by the facts. To point that out is to criticise the content of the Minister's speech, rather than to criticise him personally.

The people at the sharp end tell us of a dramatic rise since 1993, and an even more dramatic rise—for the reasons given by the Minister—since 11 September 2001. I suggest that the Minister should get his officials to check his facts, because he is plainly wrong.

Bob Ainsworth (Labour, Coventry North East)

I will do that—but if the hon. Gentleman does not mind, I will not bother to check whether there has been a dramatic increase since 11 September, because it is clear that there has.

Nick Hawkins (Conservative, Surrey Heath)

I am not disputing that.

Bob Ainsworth (Labour, Coventry North East)

I am being told that there was a steady rise from 1994 to 2000. However, it is questionable whether the figures in such reports are all that should be examined. Those reports come from relatively few organisations, which perform that responsibility with diligence, but there are many other institutions that report very little—if at all—under the current regulations, and there is reasonable suspicion to believe that money is laundered through some of them.

In effect, the hon. Member for Beaconsfield is asking us to accept that if we agree to the amendment

and raise the test, it will still be possible to secure prosecutions. He is right about that. However, he cannot argue that his amendment would have no effect. He openly and honestly admitted that it would remove the suspicion test from people working within the regulated sector. Therefore, the prosecution would be obliged to show that someone had suspicion.

Dominic Grieve (Conservative, Beaconsfield)

I know what the Minister is saying, but he has not got it right. The test would still be ''knows or suspects''; it would not just be a question of knowledge. I am prepared to make the concession, about which I had anxieties earlier, of leaving the word ''suspects'' in the Bill.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

You lost that one.

Dominic Grieve (Conservative, Beaconsfield)

I do not know whether I lost it. I lost it in terms of putting the matter to the vote, but whether I lost the argument is another matter. I am prepared to concede that the word ''suspects'' should be in the Bill, precisely because I appreciate the Minister's point that it will still be incumbent on the court to show that the person did suspect, not that he ought to have suspected, which is how the Minister wishes the legislation to be drawn. The purpose of the amendment is to prevent injustice—to prevent somebody from being sent to prison for an omission when he did not have a guilty mind.

Bob Ainsworth (Labour, Coventry North East)

I think that the matter is clear. I may be using different language from that used by the hon. Gentleman, but it is clear that he wants to raise the threshold in relation to the test of ''knows or suspects'', whereas we are saying that if the person knows or suspects, or had reasonable grounds to suspect, he should be liable. There is not a lot of point in my continuing—

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Lost the will to live.

Bob Ainsworth (Labour, Coventry North East)

Indeed. Our reasons are that we believe that there ought to be an obligation for the institutions and for people who work within the financial sector to operate at a higher level than many of them work at the moment. By introducing such a threshold, we will require them to do so. I am sad that the Opposition do not share our objective.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I hesitate to become embroiled in an argument among Labour lawyers, but I commend to the Minister the argument of the hon. Member for Wellingborough about the effect of the third condition on an offence of negligence. As he said, that third condition can never, by definition, be satisfied. He was making a drafting point, rather than one of substance about the offence of negligence. It seems to me that it is a good point, and should be given further consideration.

As the hon. Members for Wellingborough, for Wirral, West and for Redcar tried to intervene on the Minister, I was reminded of the old adage that when one is up to one's elbows in alligators, it is difficult to remember that one came to drain the swamp. I fear that we are in danger of losing sight of the purpose of the provision. This part of the Bill will be pivotal to its effectiveness. Although I am attracted by the general thrust of the arguments advanced by the hon. Member

for Beaconsfield, I am not persuaded by them. That is for one special reason—we are dealing not with the general public or the man on the Clapham omnibus, but the regulated sector.

Dominic Grieve (Conservative, Beaconsfield)

We may be dealing with the regulated sector, but the Bill would also cover the cleaning lady who hears something in the lift. She would be working in the regulated sector because of the nature of her employment.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I would be very surprised if that were the case. My understanding is that to be considered as working in the regulated sector, one would have to be carrying on a job, occupation or profession directly related to it, which would require some kind of professional accreditation. With respect, but not with all due respect—he is not yet in that much trouble—I have to say that the hon. Gentleman does his arguments a disservice by introducing ideas of that sort.

Dominic Grieve (Conservative, Beaconsfield)

I may be wrong, but the clause mentions

''a business in the regulated sector.''

If I were to work in such a business in an ancillary capacity, although I might be cleaning or catering, I would still be working in that business. If I am wrong about that, the hon. Gentleman or the Minister could put me right. My impressions from reading the clause were that it applies to businesses and not to people, and that the provisions cover anyone working in a business in the regulated sector.

Bill O'Brien (Labour, Normanton)

Order. We seem to be straying from the point. The issues to which the hon. Gentleman refers seem more relevant to amendment No. 97 than to amendment No. 487. We have gone round this circuit many times.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I am obliged to you for saying that, Mr. O'Brien. The Minister can address those points later.

Under the clause, Parliament grants the regulated sector many special rights. Every right, as all students of jurisprudence will remember, has a correlative obligation. If the regulated sector is given special rights, it must have special obligations. The hon. Member for Beaconsfield referred to the vast size of the sector and said, quite reasonably, that people will miss things. Both those points are right, and as we need effective legislation to control the regulated sector, both can be used as arguments in favour of including an offence of negligence, as can amendments Nos. 487 and 524.

I am no more persuaded about amendment No. 524, which would leave out the word ''suspecting'' and insert the words ''reasonably believing'', than I am about amendment No. 487. The wording of amendment No. 524 is exceptionally inelegant, and I do not understand its effect or what practical difference it would make. Amendments should at the very least be meaningful. If we were to delete the words that amendment No. 487 suggests that we

should, we would create immense difficulties concerning proof. That would be a retrograde step away from the meaningful enforcement of the Bill.

We are dealing with a sector that will be pivotal to the Bill, and with a part of the Bill that could really make a difference. This is one occasion on which I am prepared to put aside my liberal instincts for the moment. In this case—and in this case only—the Minister may have got it right.

Mark Field (Conservative, Cities of London and Westminster)

I support my hon. Friend the Member for Beaconsfield for having tabled the amendment, and I have grave concerns about the contribution of the hon. Member for Orkney and Shetland (Mr. Carmichael). I fully accept the Minister's accusation, and believe that the provision should be watered down. I accept the Government's underlying desire that stricter rules should apply to the regulated sector, but I am much concerned about the concept of wilful blindness, because suspicion would be part and parcel of the provision even if our amendment were accepted. We are worried about ''reasonable grounds'' and the objective sense of suspicion.

As for what is a regulated sector, I accept that my hon. Friend the Member for Beaconsfield was making an extreme point when he referred to cleaning and catering staff. However, I sensed from the Minister a simplistic idea of how the City works. Much as the grinning hon. Member for Glasgow, Pollok would not accept my view, the City is a club no more. It is now much more difficult to analyse it as a small inward-looking club that plays by its own rules. It is a far more regulated sector than it has been in the past.

The Minister referred to front-line staff. Let us imagine an average department of an investment bank, although my argument could apply to law firms and accountants, too. It will have front-line staff, who are freshly qualified and are likely to have taken professional examinations. I do not dispute that those individuals should be caught by the stricter regulation that would apply to the regulated sector. However, there are also middle-office and back-office staff. For example, let us consider the collapse of Barings in late 1994 and early 1995. Nick Leeson and others, who were clearly culpable, were middle-office and back-office staff. In a small operation, they had a high level of day-to-day knowledge and responsibility. That may not apply in a larger department, and to have strict rules for the regulated sector—as opposed to those outside it—will be difficult.

Bob Ainsworth (Labour, Coventry North East)

When I referred to front-line staff, I was pointing out that at times it is not necessarily senior staff who have access to relevant information. If staff are dealing with financial transactions, they ought to be covered by the same code and standards. If the hon. Gentleman believes, as the hon. Member for Beaconsfield appeared to, that the cleaner will be covered by the measure, I must tell him that that is not the case. He should table a separate amendment and read schedule 6, the first sub-heading of which is ''Business in the regulated sector'', alongside the clause to see the extent that it engages in such activities. People who work in the personnel or maintenance department, or who are cleaners, will not be covered by the provision.

Mark Field (Conservative, Cities of London and Westminster)

Yes, but I am sure the Minister accepts that people who work in the back office deal with settlements, for example.

Bob Ainsworth (Labour, Coventry North East)

Why should I not?

Mark Field (Conservative, Cities of London and Westminster)

I have no objection to that, but the matter is one of degree. I have cited the Singaporean example of Barings. It was a small operation, with half a dozen staff. Clearly, someone in the back office who may not have had professional qualifications would have had an understanding that money would be flowing in, and may have had direct contact with clients. However, at Canary Wharf where departments are staffed by 300 or 400 people, an individual in the back office may not have as much day-to-day involvement with such matters.

I have much sympathy with the level at which the Government are trying to pitch the clause. They want to ensure that there is a proper regulated sector. I am not sure whether I have the answer. I am just worried about the problems that I can envisage. It is clearly for the Minister and his civil servants to formulate an acceptable idea of a regulated sector. A large investment bank will have an enormous department. It will be a highly pressurised, stressful environment. Often, training will have been done on the job, and it probably was not that good. I am not making excuses for large financial services operations, but the Minister's comments about how front-line staff in the regulated sector should have direct responsibilities is a simplistic analysis.

My worry, looking at the matter from the Government's point of view, is that if we make a hard and fast rule that only people in the City with professional qualifications would be caught, unscrupulous banks would ensure that many of their back-office staff would not have the qualifications, so that they would not be caught by the provision.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Will the hon. Gentleman clarify his point about training? He said that training would not be all that good in some back offices. I understand why that would be a defence for the individual, but it is not a defence for the company. In such circumstances, surely we should not make law on the basis of accepting that back-office training will be poor.

Mark Field (Conservative, Cities of London and Westminster)

I fully accept that. I want protection for the individual rather than the bank. It would be quite wrong if a financial organisation tried to use lack of training and a pressurised environment as a defence.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Surely, if the back-room individual were so lacking in training and expertise, the court must examine those factors when establishing whether there are reasonable grounds for suspicion or knowing.

Mark Field (Conservative, Cities of London and Westminster)

That may be the case, although the Minister will not be happy to learn it. It may apply to individuals, but not to organisations.

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman is suggesting that the industry is ignoring the guidance that it receives, and that its current legal obligation to train staff is not adhered to. Does that not justify the need for the steps that we are taking?

Mark Field (Conservative, Cities of London and Westminster)

I am not suggesting that. Strict rules are in place, and the Minister rightly said that it is more difficult for large financial institutions to ensure that day-to-day training occurs, because of the increasing flexibility of the work force, which includes more and more temporary staff who go in and out for a handful of days at a time.

It is simplistic to refer to people as simply front-line staff. In the changed world of work, the Minister must appreciate the great pressures that might be on junior individuals who may not have professional qualifications. Such individuals could be ruined by the hint of going to court, let alone by being convicted on the objective suspicion test rather than on their knowledge or genuine suspicion.

Stephen Hesford (Labour, Wirral West)

The Minister rightly emphasised that businesses to which the provision will apply should have trained their staff. It is a problem for the business if it is run with a turnover of staff who come in every other day. If a temporary member of staff were in the unfortunate position of being caught by the provision, would subsections (5)(a) and (6) not come to that person's rescue?

Mark Field (Conservative, Cities of London and Westminster)

The hon. Member for Wellingborough talked about subsection (5)(a). We may discuss that later.

Stephen Hesford (Labour, Wirral West)

But is the answer not yes?

Mark Field (Conservative, Cities of London and Westminster)

The answer is maybe, as in many of these matters—or yes and no, as the hon. Gentleman, as a lawyer, knows.

The offence is highly serious, and until now, the prosecution had to prove beyond reasonable doubt that an individual knew or suspected something. The phrase ''reasonable grounds'' represents a high hurdle for a professional to traverse. My worry about the thinking behind this clause, and others, is that there must be analysis after the event. People will piece together things after money laundering and criminality has come to light. A great burden will be placed on individuals. Indeed, the burden of proof will be almost reversed.

The objective test for suspicion represents more than the Government's desire for a greater duty of diligence. It is understandable for those in the professional sector—

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.

Standing Committee B

Proceeds of Crime Bill

John McWilliam (Labour, Blaydon)

The Committee will wish to know that shortly before this sitting, the Programming Sub-Committee met and agreed a resolution proposing to amend the programming order agreed by the Committee at its first sitting. Copies of the resolution agreed by the Programming Sub-Committee are available on the Table in the Room.

When the Committee's proceedings on amendment No. 487 to clause 324 have been disposed of, I will invite the Minister to move a motion in the same form as the resolution agreed by the Programming Sub-Committee.

Clause 324 - Failure to disclose: regulated sector

John McWilliam (Labour, Blaydon)

I remind the Committee that with this we are discussing amendment No. 524, in page 187, line 28, leave out 'suspecting' and insert 'reasonably believing'.

May I remind members of the Committee that the issue before them is extremely narrow? It concerns the difference between reasonable grounds for knowing or suspecting and reasonably believing. That is all.

Mark Field (Conservative, Cities of London and Westminster)

We are also speaking to amendment No. 487, which has a slightly broader interpretation, Mr. McWilliam. Our return to the Room three and a half hours after commencing the debate reminds me of our shenanigans on clause 321. I think that that took almost four hours to debate.

I was coming to the end of my comments when we rose this morning, but I want to express to the Minister our worry about an objective test for suspicion. No one would want professionals who genuinely suspect that money laundering is taking place to get off scot-free. However, providing for an objective test of reasonable grounds is more than a statement of the Government's desire for the greater duty of diligence to which the Minister referred.

This is a matter of degree, and there must be respect and a balance of judgment. I worry—particularly when dealing with professionals in financial services or the legal world—about a provision in respect of money laundering. There will no doubt be similar provisions in other areas of regulation that will, in effect, bar professionals from using their judgment. Above all, a person who asks for advice from a professional—

particularly a legal professional—wants a judgment. Such a person would not necessarily receive the right answer, because as we all know, such matters are open to interpretation. It would be a retrograde step for people in the financial services industry to be debarred from using their judgment because of fear, and have to take a restrictive and negative view.

I want to talk briefly about the provision being seen as a wildly anti-European statement.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

There is nothing wrong with that. [Interruption.]

John McWilliam (Labour, Blaydon)

Order.

Mark Field (Conservative, Cities of London and Westminster)

I fear that what lies behind much of part 7—and it goes back to angst on the part of the European Union about the grand international movement of moneys—is, in part, a worry about state control. I expect that that issue will be raised by my hon. Friends.

John McWilliam (Labour, Blaydon)

Order. I think that the hon. Gentleman is trying to introduce into the debate issues that are far broader than the import of the amendments, and I shall have to take a view when I decide whether we should have a clause stand part debate. If he wants to do that, that is fine, but he knows what the consequences may be.

Nick Hawkins (Conservative, Surrey Heath)

On a point of order, Mr. McWilliam, I am sure that you have been briefed by Mr. O'Brien, who was in the Chair this morning. The debate was wide, and my hon. Friends and I know that it will have an impact on whether there is a separate clause stand part debate; indeed, my hon. Friend the Member for Beaconsfield (Mr. Grieve) and I will not seek much of a stand part debate. However, it is fair to point out that this morning we talked about some of the European implications that arise from seemingly minor amendments.

John McWilliam (Labour, Blaydon)

That may be so, but I have to deal with the selection list in front me, on which are two amendments that are narrow in scope, as they merely deal with the test. I would be obliged if hon. Members would stick to that subject.

Mark Field (Conservative, Cities of London and Westminster)

I apologise, Mr. McWilliam, and I will say no more, as I appreciate that the Committee has to deal with seven groups of amendments under clause 324, and that other hon. Members wish to speak.

Nick Hawkins (Conservative, Surrey Heath)

On point of order, Mr. McWilliam. It would be helpful if Hansard were to record that a few moments ago, in response to my hon. Friend's powerful contribution expressing his sceptical approach to European matters, the hon. Members for Glasgow, Anniesland (John Robertson) and for Glasgow, Pollok (Mr. Davidson) both loudly stated that there was nothing wrong with such an approach. To record that would be especially helpful, as the hon. Member for Glasgow, Pollok has made an appearance in today's press.

John McWilliam (Labour, Blaydon)

I fail to understand what opinions expressed in today's press by the hon. Member for Glasgow, Pollok—or by any other hon. Member—have to do with these two amendments. They are narrow in scope; they merely deal with the test of negligence.

Mark Field (Conservative, Cities of London and Westminster)

I thank my hon. Friend the Member for Surrey Heath (Mr. Hawkins) for his comments, and I will say no more, other than urging the Minister to give serious thought to agreeing to the amendments.

Paul Stinchcombe (Labour, Wellingborough)

I rise to speak to the clause and the amendments—

John McWilliam (Labour, Blaydon)

Order. We are dealing only with this narrow group of amendments. I treat all Committee members in the same way, so the admonition that I gave to the hon. Member for Cities of London and Westminster (Mr. Field) applies to the hon. Gentleman, too.

Paul Stinchcombe (Labour, Wellingborough)

I rise to speak on this amendment to this clause, because, unlike the hon. Member for Cities of London and Westminster, I do not believe that it merely raises points of degree. I believe that it raises both a point of principle and a drafting point, and I wish to bring both of them to the Committee's attention.

Although the clause creates a single offence of failure to disclose, that offence can be committed in one of two ways. The first condition is that a person

''(a) knows or suspects, or

(b) has reasonable grounds for knowing or suspecting,

that another person is engaged in money laundering.''

The first of those alternatives is a subjective test; someone would have to know or suspect that another person was engaged in money laundering. However, the second alternative is an objective test; someone would simply have to have reasonable grounds for knowing or suspecting—and that alternative would not be engaged at all if he did know or suspect, because that would be covered by the first alternative.

Therefore, we are now contemplating the creation of an offence of negligence whereby someone can be convicted of failure to disclose the information that another person is engaged in money laundering, when he did not know or suspect that to be the case, although objectively he should have been aware of it.

The purpose of the amendment is to remove that objective offence of negligence not only from this clause, but from the entire Bill. That raises a question about drafting: is it right to exclude that offence from the section? It also raises a question of principle: is it right to exclude it from the entire Bill? I wish briefly to take the Committee through both those issues in turn.

As for the pure drafting point, I believe that it would be a massive improvement if the clause were to cover only the offence of knowing or suspecting that another person was engaged in money laundering and failing to disclose the information that gave rise to that knowledge or suspicion. It should not cover the objective offence as well.

I say that for several reasons. If the words to which the amendment refers were deleted, and various other consequential amendments were made, that would leave a perfectly explicable, clear and certain offence of failing to disclose information when one knew or suspected that the person was engaged in money laundering. Essentially, the offence would have four elements. First, one would have to know or suspect that the person was engaged in money laundering, and

it would be irrelevant whether there were reasonable grounds for that knowledge or suspicion. Secondly, the information that gave rise to that knowledge or suspicion would have to have come to one's attention in the course of one's business within the regulated sector. Thirdly, one would have had to fail to disclose that information, even though one knew or suspected that the person was engaged in money laundering. Fourthly, there would have had to be no reasonable excuse for that failure to disclose. That would seem to create a sensible criminal offence, which would be perfectly clear and better worded than that in the Bill, which, by incorporating the objective offence within the same provision, creates inherent unnecessary confusion.

Taking those four elements in turn, the first condition of the objective offence is not that one knew or suspected but that one should have known or suspected that the person was engaged in money laundering. The second condition is that the information came to one's attention in the course of one's business, and the third that one never alerted anyone to that information. Of course one would not have alerted anyone to that information, because one would not be suspicious and one would not have known its importance. My hon. Friend the Member for Wirral, West (Stephen Hesford) and I had a discussion earlier about whether that meant that the condition could never be fulfilled. The fact is that it is never engaged, and is inevitably fulfilled. If one is not aware of the significance of the information, one will, of course, not disclose it—unless one routinely discloses all information whether one is suspicious or not, which would be absurd.

The fourth condition is also inherently difficult if we seek to define the objective offence within a single clause, as you would be exempt if you had a reasonable excuse for not disclosing the information. Intuitively, if the reason why you have not disclosed is that you did not realise that it was important, that is a reasonable excuse. However, that cannot be right, for all the reasons given by the Minister and by my hon. Friend the Member for Redcar (Vera Baird), because that would remove the offence altogether. You would automatically have a defence when you did not know or suspect, as that would be the reason for not disclosing, so the offence could not be established.

Dominic Grieve (Conservative, Beaconsfield)

I agree with every word the hon. Gentleman says about the drafting aspects. I simply venture to suggest that the reason for such problems is that the model that has been used is section 52 of the Drug Trafficking Act 1994. That has been reproduced, with twists to try to encompass circumstances in which the test is not knowledge or belief but an objective test. That is why this part of the Bill is in such a mess.

Paul Stinchcombe (Labour, Wellingborough)

I am grateful for that. I am not especially aware of the origin of the drafting, or why a statutory provision has been created in such a way, but however it originated, I agree that it can be improved by the kind of amendment suggested. Although that would improve the clause, it would not improve the Bill. I say that because as a matter of principle, there should be an objective offence, but it would be better

to create it in a separate provision of failing to disclose information when you had reasonable grounds for knowledge or suspicion that the other person was engaged in money laundering. A simpler objective offence would deal with the drafting problems that I mentioned.

We are dealing with the regulated sector, and with a massive social problem. We should therefore impose high burdens of professionalism on people who are dealing with the proceeds of crime in the regulated sector. Objectively, if there were reasonable grounds for suspicion of money laundering, people working in the sector should disclose that information. If they are not up to that standard, they should be penalised for that failure. It is not unusual to have such a standard of proof in a professional area, but we can take a better approach to the clause by dividing those two offences. You must make it clear that there are two offences that are committed in two different ways, and make it clear that there are two levels of seriousness, so that different penalties will probably be appropriate.

John McWilliam (Labour, Blaydon)

May I remind the Committee that the word ''you'' refers to me? That word was used many times in that contribution.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

I remind the Committee that the hon. Member for Cities of London and Westminster has admitted that the purpose of his contribution to the debate was to water down the clause. We must ask ourselves whether the Opposition's amendments were designed to make it more difficult to catch misbehavers—or easier. It is absolutely clear that their proposals would make it much more difficult to catch and punish white-collar employees, workers or agents who are collaborating with drug dealers and other criminals, and without whom the said criminals could not be nearly as effective or as prosperous.

All major crime figures—certainly in the west of Scotland, and, I am sure, in the rest of the country—have staff such as drivers, enforcers and, in some cases, killers, but they will also have lawyers, accountants and bankers. Any person from those categories is just as bad as the others, inasmuch as he is supporting the actions of major criminals.

Mark Field (Conservative, Cities of London and Westminster)

Understandably and rightly, the hon. Gentleman has drawn attention to a problem. Major gangsters have an infrastructure of support that goes beyond the driver and the heavies to the white-collar professional. No doubt anyone who was collaborating would fall under the clause, even if our exemption were accepted. There is no question that those who know or suspect that money laundering is taking place would be guilty. We do not dispute that. What we are worried about is the idea of a reasonable suspicion that was not held not by the individual concerned, but objectively, some months or years later, by the court. Those who collaborate in the distribution of the proceeds of crime should rightly feel the full brunt of the law.

John McWilliam (Labour, Blaydon)

Order. That was rather a long intervention, but it had the merit of bringing the Committee back to the amendments, and I should be grateful if the hon. Member for Glasgow, Pollok would deal with them.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Indeed, it did, Mr. McWilliam—and in a helpful way, too. Subsection (2)(b) refers to

''reasonable grounds for knowing or suspecting''.

It ties together the argument about collaboration put forward by the hon. Member for Cities of London and Westminster in response to my point. The good old phrase, ''There are none so blind as those who will not see,'' is important. A substantial number of lawyers, accountants and bankers choose to turn a blind eye to the sources of the moneys with which they deal and from which they profit. It is only subsequently that that defence is tested in the court. They work their way through various arrangements, pretending that they did not understand, and it is only when they go to court that judgments are made about whether their actions were reasonable.

Nick Hawkins (Conservative, Surrey Heath)

Obviously the hon. Gentleman appreciates that Opposition Members take the problem seriously, but we may differ from him about its scale. He has often expressed a general view about lawyers, accountants—and, indeed, Conservatives—but what does he regard as a ''substantial'' number of such professionals? Will he give us a ball-park figure of how many he considers are involved in such corrupt practices?

John McWilliam (Labour, Blaydon)

Order. Can we come back to the amendment?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Thank you, Mr. McWilliam.

I must point out that there was a mistake in the Hansard report of our last sitting. I was quoted as saying:

''I do not think that all lawyers are crooks and shysters, and not just because some of them are good lawyers.''—[Official Report, Standing Committee B, 17 January 2002; c. 1044.]

I actually said, ''not just because some of them are dead'', which is not quite the same thing.

I shall follow up the question of what a person should have known: the ''didnae ken'' defence. It seems that much depends on the culture of the institution in which the individual operates. If there is a culture of compliance, it is likely that there will be few difficulties. If the attitude were, ''We do not want to be involved in this in any way whatever'', problems would be minimised. However, that is not the culture, and legislation along the lines in the Bill is desirable.

The question of culture may seem to take us wider than the clause, but it is essential to allow us to make a decision about subsection (2)(b). May I refer to an article from a newspaper last year that was about exactly this point of culture? The headline is, ''Swashbuckler who just could not resist a deal'', and the article says:

''The SFA's public punishment of Sir Michael Richardson is a sad finale to a 50-year career in the City''.

Apparently, two independent tribunals found that Sir Michael was

'' 'no longer fit and proper' to work in the City.''

The question of his attitude is relevant to our debate.

That article appeared not in the Morning Star, Socialist Worker, or Militant, but in The Daily Telegraph, which is not known as an instigator of

the overthrow of capitalism—unless things have changed drastically. It is against the European Union, but not necessarily against all things. The article continues:

''It is a sad ending to a 50-year career that spanned Panmure Gordon, Cazenove, Rothschilds and Smith New Court. Sir Michael spearheaded privatisation, is known for his unswerving loyalty to clients and was once considered a brilliant judge of stock markets. He describes his knighthood in 1989 as the 'high point' of his career. Sir Win Bischoff, chairman of Schroder Salomon Smith Barney, says: 'I first came across him when he was working on a number of transactions for Hanson Trust. He had a very good read of the markets and an extremely good bedside manner. He handled his clients extremely well.' ''

I remind the Committee that Sir Win Bischoff was referring to someone being described as

'' 'no longer fit and proper' to work in the City.''

The article continues:

''Lord Walker, former energy secretary, describes him as 'a very tough, very good corporate financier'.

Richardson's public punishment has shocked his contemporaries. Sir Evelyn de Rothschild, chairman of the family bank, describes it as 'quite unnecessary. He should have been warned off or given a slap on the wrist, but to ban somebody for life at 70-odd is out of all proportion. He did a terrific job here at Rothschilds, and we owe him a tremendous debt of gratitude,' he adds. 'He has a strong character and he invigorated our corporate finance department.' ''

That is a pretty glowing reference from a person who is obviously very high up in the City. It may help the Committee if I outline what Richardson did, because it is relevant to the idea of a person who has reasonable grounds for knowing or suspecting.

The Daily Telegraph states:

''The fall started in October 1998 when, as vice-chairman of Hawkpoint Partners, then a division of NatWest, Richardson wrote a letter on headed notepaper on behalf of an acquaintance, Alan Shephard.

'I knew him well and he'd had three major jobs while I'd know him with top American companies,' Richardson explains. 'I believed in him.'

The letter declared that 'up to $350m' was available, subject to certain guarantees. Over the next 10 months, Richardson wrote at least four similar letters for differing sums. 'See how simple they are,' he says, placing two on a coffee table.

A letter from a financial company 'assured me that the money was there and, secondly, they told me that corporate business would come to me,' he explains. 'I was employed to get corporate business for Hawkpoint,' he adds defiantly.

Unfortunately, Shephard has a background. He was once accused of advance-fee fraud in America''—

I shall not go into detail and explain what advance-fee fraud is, as I am sure that Conservative Members have a greater knowledge of such matters than I do. The article continues:

''Richardson never sought approval from NatWest or Hawkpoint to write the letters. It was only when he introduced an acquaintance of Shepard's to NatWest, who 'opened an account and put £100m in it' that the alarm went off.

'NatWest immediately closed the account,' he admits. 'Then they came to me and said, 'we don't want you to introduce any more banking business from your acquaintance to NatWest,' which I didn't.' ''

The Daily Telegraph goes on to state:

''This is typical of the man. He cannot resist the deal, but nowadays his recollection of events may not be as clear he thinks.

There are glaring inconsistencies in his account. Friends suggest his memory is not what it was.''

Steve McCabe (Labour, Birmingham, Hall Green)

Like Ernest Saunders?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Yes, the Guinness. story. Could this be another remarkable case of a cure for Alzheimer's disease being discovered in the City of London?

John McWilliam (Labour, Blaydon)

Order. First, reading extensively from documents is to be deprecated. Members should précis them. Secondly, the hon. Gentleman must focus on money laundering. He has not yet done so.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Thank you, Mr. McWilliam. I shall now refer specifically to City attitudes to having

''reasonable grounds for knowing or suspecting''

that people are engaged in money laundering. The City's culture is the key to this issue. The question is whether folk can be trusted in such matters—I apologise for my digression on the subject of Alzheimer's disease.

Mr. Field rose—

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

I give way to the hon. Member for NatWest.

Mark Field (Conservative, Cities of London and Westminster)

That is an appropriate touch of Alzheimer's disease.

The issue of culture has rightly been raised. The antics of Sir Michael Richardson have nothing to do with money laundering, although I understand that the hon. Gentleman wanted to make a particular point. In an earlier contribution I tried to make the point that the culture has changed greatly. Sir Michael Richardson was a major City figure and his referees, to whom the hon. Gentleman referred, were from a bygone age of the City of London. The culture is now different, and the City is much better regulated. Everyone who works in the City, and all Conservative Members, agree that we need more regulation, but the culture that the hon. Gentleman mentioned has moved on.

John McWilliam (Labour, Blaydon)

Order. If the hon. Member for Glasgow, Pollok were to go down that road, and if I were to permit it, we would start to discuss Barings bank and all sorts of things that are not at issue under the amendment. Will he concentrate on the offence of money laundering and the tests?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

In my view, it all comes down to whether someone

''has reasonable grounds for knowing or suspecting''.

Nick Hawkins (Conservative, Surrey Heath)

I want to understand the case that the hon. Gentleman was making before my hon. Friend intervened on him. Is he saying that in the case about which he quoted extensively, the £100 million was part of a money-laundering exercise? If so—and that is what I thought he might be suggesting—is not the fact that NatWest immediately closed the account and said that it would not take any more funds an example of the system working?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

That is an example of the system working, and I am glad that it happened. However, later in the article it becomes clear that some other arrangements were made, and in particular, letters were written, and those form evidence that the system

was not working. That is why I am unconvinced by the assertion by the hon. Member for Cities of London and Westminster that that is all in the past. There are further relevant references from individuals who are still active. The continued existence of that culture makes me wonder whether the City, and professions such as law and accountancy, can be trusted to police themselves.

Yesterday I brought to the Committee's attention a quotation that indicated that lawyers seemed to believe that money laundering regulations did not apply to them. That culture still exists.

May I also touch on the point about staff, Mr. McWilliam? I was struck that Conservative Members expressed concern for cleaners, as the Conservative party has not expressed concern about them in many other ways. I suspect that that point was raised as a red herring, and I am glad that the Minister dealt with it as he did.

Dominic Grieve (Conservative, Beaconsfield)

The hon. Gentleman is wrong to lack anxiety on that subject. The Minister might be able to satisfy us that schedule 6 is drafted in such a way as not to cover such people. Before lunch, I said to him informally that I would be delighted if they were not so covered, but that my initial reading of the schedule had not suggested that that was the case.

I find abhorrent the idea that executives or staff who have nothing to do with their organisations' regulated functions should be criminalised as a result of, for instance, overhearing a chance disclosure, and not knowing what to do about it. I inferred from the Minister's remarks that he shared my view about that, which is why I raised the point that I did.

John McWilliam (Labour, Blaydon)

Order. Can we save that subject for the debate on amendment No. 97? We have not got there yet.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Thank you, Mr. McWilliam.

I think that the hon. Member for Surrey Heath wished to say something. Has it been covered by the comments of the hon. Member for Beaconsfield?

Nick Hawkins (Conservative, Surrey Heath)

No, I wanted to make a slightly different point—although of course I agree with what my hon. Friend said.

The Minister is incorrect: schedule 6 is not drafted to exclude cleaners. The hon. Gentleman believes that Conservative Members do not care for anyone outside the professions and the City of London, but I have frequently raised issues on behalf of blue-collar workers in connection with a variety of legislation.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

The hon. Member for Surrey Heath, the cleaner's friend! I will bear that in mind.

It is important to discuss the degree of responsibility of junior staff, because it raises serious issues about having reasonable grounds for knowing or suspecting. If someone walks into the building with an enormous bag full of used fivers, should it be a defence that reporting that is the responsibility of a senior member of staff? I understand the point about back-office staff; some of them will have responsible jobs and some of them will not. However, everyone

involved in the chain of transactions ought to have a separate and individual responsibility for reporting.

I would much rather the same transaction were reported twice or thrice than not be reported at all. What happens if everyone in an organisation leaves the responsibility for reporting a transaction to someone higher up the chain, and that person deliberately chooses not to report it, claiming that they had no reasonable grounds for knowing or suspecting, even though that is patently untrue? They will be guilty of an offence, but the transaction will not have been reported. That highlights why subsection (2)(b) is crucial; it refers to having

''reasonable grounds for knowing or suspecting''.

Nick Hawkins (Conservative, Surrey Heath)

I understand the hon. Gentleman's point. He believes that it does not do any harm to have multiple reports, and says that he would far rather a suspicious transaction were reported twice or thrice than not at all.

We agree that there ought to be a report, where there is proper ground for one. However, if the policy that the hon. Gentleman advocates, which would lead to multiple reporting, were introduced, and it created a huge bureaucratic empire in NCIS, caused the City of London to grind to a halt, destroyed the economy of this country and had all the City's business going to Frankfurt or Paris, what would he think about that?

John McWilliam (Labour, Blaydon)

Order. Can we come back to order? We are not dealing with reporting. That is covered under a different part of the clause. Will the Committee deal with the narrow point with which it is supposed to be dealing, and not wander off in all sorts of directions? We are dealing only with amendments Nos. 487 and 524. The debate will go no further.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Indeed, Mr. McWilliam. I am glad that you have dealt with the matter and rightly rebuked the hon. Member for Surrey Heath, who was attempting to lead me down all sorts of highways and byways. A few more rebukes to him would not go amiss.

John McWilliam (Labour, Blaydon)

Order. It strikes me that the hon. Gentleman does not need much leading.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Have I not followed the Minister's lead throughout the debate?

Finally, I turn to the issue of—

Nick Hawkins (Conservative, Surrey Heath)

Finally?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

In common with most of my hon. Friends, I give ''finally'' a particular parliamentary and political meaning, which is that we are about 40 per cent. through our speeches, but we want to give our audience hope.

Nick Hawkins (Conservative, Surrey Heath)

Before the hon. Gentleman says ''finally'' a second time, I must point out that we are not blessed in this Committee with the presence of the acknowledged parliamentary expert, the hon. Member for Southwark, North and Bermondsey (Simon Hughes), who usually says ''finally'' about six times in each speech.

John McWilliam (Labour, Blaydon)

Order. I have already ruled in a previous Committee on the language used by the hon.

Member for Southwark, North and Bermondsey. Members of Committees must use language that the Chairman understands—and when that hon. Gentleman says ''finally'', we understand exactly what he means.

Norman Baker (Liberal Democrat, Lewes)

On a point of order, Mr. McWilliam.

John McWilliam (Labour, Blaydon)

Order. I must first say that the hon. Gentleman was not a Member of Parliament when I made that ruling in respect of the hon. Member for Southwark, North and Bermondsey.

Norman Baker (Liberal Democrat, Lewes)

I should point out for the record that my hon. Friend the Member for Southwark, North and Bermondsey does not say ''finally'' on a regular basis. He may say ''seventeenthly'', but not ''finally''.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

That is a new one on me.

It is helpful to have a view from the Liberal Democrats. We had only one Liberal Democrat member of the Committee at yesterday's sitting—and if I remember correctly, he had two opinions: the hon. Member for Orkney and Shetland (Mr. Carmichael) was able to have a discussion with himself. It was noticeable this morning, when two Liberal Democrat Members were on the Front Bench, that they were unable to reach a view and abstained on the one Division that was held. Surely with two Liberal Democrat members in the Committee, at least four opinions could have been advanced. There are now two Liberal Democrats in the Committee again, but it is significant that one is sitting on the Front Bench and one on the Back Bench. I am not clear whether that means that one of the four of them has a casting vote—but I shall not continue with that line of argument, Mr. McWilliam. In fact, I shall not mention it.

The hon. Member for Henley (Mr. Johnson) is absent from our proceedings at the moment. Following what he said yesterday, as is recorded in column 1021 of the Hansard report, about the similarities between his constituency and Pollok, I understand that he is searching for the Pollok regatta, but has not been able to locate it yet.

In the light of my potentially relevant remarks, I urge the Committee to reject the amendment. I draw again to the attention of my colleagues the fact that I regret that the Scottish nationalists are absent from our proceedings.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

May I helpfully remind the hon. Gentleman that the Scottish nationalists did not make any requests to be members of the Committee?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Goodness me, I had forgotten that. I am grateful to the hon. Gentleman. I think that it was the hon. Member for Orkney who drew that matter to my attention yesterday, and it is the hon. Member for Shetland who is telling me about it today. It is a particularly helpful and constructive point.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

To follow up the hon. Gentleman's earlier point about the meaning of language, will he

make it clear that when he says ''yesterday'', he means last Thursday?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

It was the previous day in Committee, so I assumed that as we live a virtual universe here, that was the appropriate term to use. I am glad that somebody from Orkney and Shetland has been able to contribute constructively to our debates, and I look forward to his career on the Liberal Democrat Back Benches.

We have heard wonderful words from the hon. Member for Cities of London and Westminster, but the fact is that the Conservative proposals would water down the provision. There are no ifs or buts: they are concerned not with strengthening the provision or with finding other ways of catching people, but with watering it down. That is a disgrace. If the Conservatives had tabled amendments that attempted to toughen up the provision, we would have listened to them. The hon. Gentleman says that he represents, among others, some of the most corrupt people in the country—[Interruption.] I hope that I am not being too subtle for the Liberal Democrats; perhaps I should explain my point later on. In any event, we should mark their cards accordingly, and I look forward to reporting the matter as widely as possible.

Dominic Grieve (Conservative, Beaconsfield)

During the intervention by the hon. Member for Orkney and Shetland, I was struck by the thought that the hon. Member for Glasgow, Pollok—who is, after all, a politician well versed in his skills—had forgotten that during an earlier intervention the hon. Member for Orkney and Shetland had told him that the SNP had not asked to serve on this Committee. Yet it is such forgetfulness that we plan, through the Bill, to criminalise. The hon. Member for Glasgow, Pollok might like to reflect on that point, and on whether making references to the SNP a criminal matter within the Labour party—sometimes one feels that they already are—might not be too onerous and draconian a step.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

That is a helpful point. The amendment would delete the phrase

''has reasonable grounds for knowing or suspecting''.

Have we reasonable grounds for knowing or suspecting that the SNP did not ask for a place on this Committee? [Hon. Members: ''Yes.''] Perhaps we have, and that undoubtedly should be an offence. I do not want to labour the point, but it is worth drawing it to people's attention.

John McWilliam (Labour, Blaydon)

Order. So far nobody has accused the SNP, the Liberal Democrats or any other party of laundering money.

John Robertson (Labour, Glasgow Anniesland)

There is still time.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

As my hon. Friend says, there is still time, which is why we are in favour of openness in political accounting. Is it not true that Sean Connery's supplying huge amounts of money from abroad did not perhaps come across as clearly as it might have done? The general point is a useful one, and we will probably want to pursue it on another occasion.

Mr. Carmichael rose—

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Perhaps the hon. Member for Orkney and Shetland wants to make a point.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

We merely wished to suggest that the fact that the SNP did not ask to be included on this Committee, but has made such a fuss about its proceedings, is in itself criminal.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

That is a very useful point, although the hon. Gentleman's reference to himself as ''we'' perhaps displays delusions of adequacy.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

No one could accuse you of that.

John McWilliam (Labour, Blaydon)

Order.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I meant him, Mr. McWilliam.

John McWilliam (Labour, Blaydon)

Sedentary interventions are to be deplored at any time, but I should also point out that the Chairman never displays delusions of adequacy; he always knows where the enemy is.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Yes, that was an outrageous attack on you, Mr. McWilliam, for which you properly rebuked the hon. Gentleman.

''Ignorance is no defence'',

said a long-standing friend of Sir Michael Richardson. The friend continued:

''He is very, very upset by it all. I think if he'd been called Mr. Tiddlywinks, you would not have heard about this. He is not self-seeking but Michael has always gone out of his way to have a high profile and I suppose this is the result . . . It is not the substance of what he has achieved in his career.''

The article then returns to the question of culture:

''Yet friends and contemporaries admit that, at times, Richardson has demonstrated a remarkable naivety about his clients.''

How many other people in the City display a remarkable naivety about their clients?

''He introduced Robert Maxwell to Smith New Court, even though both Cazenove and Rothschilds, his former employers, had flatly refused to do business with the fat fraudster.''

That reflects to the credit of Cazenove and Rothschilds, and shows that not everyone in the City is a rascal—even those who are not dead.

The article goes on:

''Richardson had helped float Pergamon Press in the 1960s'',

and refers to a number of other issues in the past, but I do not want to touch on those. One of Mr. Richardson's friends said:

''I think Michael is an immensely generous and very imaginative man, who gives so much of himself to friends. But, ultimately, I think you can call into question his judgment.''

How many other senior figures in the City are there whose judgment could be called into question when they were considering whether they had reasonable grounds for knowing or suspecting? He went on:

''He is a very talented man, but he needs to be more shepherded. It needs somebody else to dot all the 'i's and cross the 't's. His judgment of a transaction was without doubt. When it came to people, it was sometimes suspect. He probably works best with somebody who keeps him in check.''

How many other senior figures in the City need somebody working with them to keep them in check?

We must therefore not only retain the paragraph that Conservative Members wish to delete but be conscious that the culture that they are defending is the same culture that protects the gangsters and drug dealers who ruin the lives of many in my constituency and in the constituencies of many of my hon. Friends.

Nick Hawkins (Conservative, Surrey Heath)

I thank the hon. Gentleman. He always makes speeches that are both entertaining and partly serious, and his last point was a serious one. I am sure that all those, particularly at a senior level, in NatWest, Smith New Court and Cazenove will be especially grateful for his ringing endorsement of their high compliance standards.

The hon. Gentleman's serious point, for which he has used a particular case about which he has quoted extensively from the report in the Daily Telegraph, begs one question. It is the same question as those from the Law Society of England and Wales who advise my hon. Friend the Member for Beaconsfield and myself put to us when they discussed the matter with us during the lunch break: will the Minister in due course be able to give us any examples of what he and the Government think will, under their interpretation of the clause, be a reasonable excuse? I put that point seriously to the Minister.

I hope that when the Minister addresses the serious parts of the speech made by the hon. Member for Glasgow, Pollok, he will also say what the Government's view is on whether the kind of case that the hon. Gentleman describes would have been caught by the Bill as Conservative Members wish to amend it. We do not have the details; we only have the press report, but my view is that a person behaving in the way that the hon. Gentleman describes would probably be caught by the clause as it would be amended.

However, I want to hear from the Minister what the Government think would be a reasonable excuse, because we are concerned that what may in practice result from this part of the Bill, if it is not amended, is a huge amount of empire building within NCIS. We have made the criticisms of the current system that those at the sharp end believe are valid. We think that it will be 10 times worse under the new system unless our amendments succeed.

We believe that the Minister will also have to deal with the revised compliance cost assessment. We had a debate this morning, in which the Minister accepted some interventions from me, about the difference between us about the facts of how many reports there are and how, in the view of those at the sharp end, the number has grown exponentially since 1993. The Minister refers to it as a steady rise. We are advised that it was a dramatic rise.

May I add one further piece of information for the Minister? When we adjourned at lunchtime I was advised by our expert from the Law Society's anti-money-laundering committee that the details that he had came from a lecture given recently by a senior person from NCIS. I hope that when the Minister's officials check further, they will specifically check what senior people in NCIS are saying in public lectures to the experts in the City who are trying to combat

money laundering. If what is being said in public lectures is different from the advice being given to the Minister, some further thought needs to go into that.

This afternoon, Mr. McWilliam, you have rightly and regularly exhorted us from the Chair to concentrate on the specific amendment that my hon. Friend the Member for Beaconsfield so ably moved. I remind the Minister and the Committee that we put forward two alternatives. We did not want to hang our hat on just one piece of drafting, although my hon. Friend rightly said that we preferred one version. We wanted to give the Government a choice, but we genuinely feel that there is a danger of injustice unless some redrafting is done.

I urge the Minister, even if he does not listen with any great enthusiasm to what my hon. Friend and I say, to listen to the eminent counsel on his own side. The hon. Member for Wellingborough also thinks that there is something wrong with the drafting, although, in fairness, he does not go all the way with my hon. Friend and me. He accepts, I think, part of the spirit of what we are trying to do, agreeing that the clause as it stands is infelicitously drafted and could be improved.

Dominic Grieve (Conservative, Beaconsfield)

My hon. Friend may also want to bear in mind something else that the hon. Member for Wellingborough said, which we have not developed. He referred to the possibility that although an objective offence might remain, it might nevertheless have a completely different set of penalties. The Committee has not had an opportunity to consider that. If the Government wish to come forward with such proposals, I am sure that my hon. Friend and I will consider them, even if we might continue to have serious reservations.

Nick Hawkins (Conservative, Surrey Heath)

My hon. Friend is right to raise that issue. We may come back to it as later amendments tabled to the clause or penalties under this part of the Bill are considered. That might be another way of dealing with the matter, as the hon. Member for Wellingborough rightly said.

I simply repeat, especially to sceptical Government Members, and in particular to the hon. Member for Glasgow, Pollok, that we want a piece of legislation that will work, and that will not so overburden the authorities with reports that the entire system grinds to a halt. Our scepticism about that might be right. We are not claiming to be experts—although I worked in this field some years ago as chairman of a compliance committee for a major plc, and have also worked in insurance, banking and financial services, albeit under a previous regime—but we have been advised by experts. Those who are experts in the system as it has operated in the past few months and years tell us that it is not working now, even with a much lower level of reporting.

The hon. Member for Glasgow, Pollok, who is rightly trying to protect his constituents—we applaud him for that—wants a system that will work. The difference between us is over whether he is right in believing that everything that the Government introduce must be perfect simply because it will hit

the Mr. Bigs. I do not think that it is. No one looking at a Bill as complex as this can be absolutely confident that any Government have necessarily got it right. Even though they are a Labour Government I earnestly encourage him—were it not for politics, I would be calling him my hon. Friend the Member for Glasgow, Pollok—to be sceptical of any Government of any party who say, ''We are certain we have got this right.'' There may be circumstances in which even a wicked Tory Opposition, as the hon. Gentleman sees us, are right in saying, ''Hang on a minute, the Government might not be producing something effective here.''

I freely accept that the problems in my constituency are not as serious and deep-seated as those in the hon. Gentleman's, but there are people suffering because of drug pushers and dealers there, and I raise the issue regularly in the House. All of us who have dealt with drugs cases in the courts, as I have over many years, both in prosecuting and defending, know their terrible cost, and there are deaths from drug misuse in my constituency too. We want a piece of legislation that will protect my constituents as well as those of the hon. Gentleman.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

I have always seen myself as a critical friend of the Government—but they are always keener on friends than on critics. However, does the hon. Gentleman agree with the hon. Member for Cities of London and Westminster, who clearly said that he wanted the clause watered down? Does he accept that the phrase ''watered down'' does not give the immediate impression that the hon. Gentleman wants to strengthen it in a way that makes it work? Can we expect the young lad who has just got it wrong and given us the wrong line to be banished from the Committee, as the hon. Member for Henley has been banished?

Nick Hawkins (Conservative, Surrey Heath)

My hon. Friend the Member for Henley will be returning, and has not been banished in any way.

My hon. Friend the Member for Cities of London and Westminster will no doubt speak for himself, and may want to make a further contribution to explain his use of that particular phraseology.

Mark Field (Conservative, Cities of London and Westminster)

When answering that intervention my hon. Friend pointed out that Conservative Members want to ensure that the Bill works properly. The worst possible thing is to have draconian rules that either are ignored and are not enforced, or which are so stifling that there is enormous bureaucracy in the City of London and all the other financial institutions, which would be a disaster. That would lead not only to work leaving the City of London but, more importantly, to disrespect for the law. This is all about making the Bill work. We simply wanted the draconian measures watered down, not their effect. Indeed, the opposite is the case. Our plan is to ensure that we get the law right, and that it is properly enforceable and enforced.

Nick Hawkins (Conservative, Surrey Heath)

I agree with every word that my hon. Friend has just said. That is the complete answer to the hon. Member for Glasgow, Pollok.

I need not detain the Committee any longer, but I want to hear the Minister's response and, in particular, what he thinks—

Stephen Hesford (Labour, Wirral West)

Because of his lunchtime conversation with the representatives of the Law Society of England and Wales, the hon. Gentleman asks what might be a reasonable excuse. I am surprised that Conservative Members need to ask that question, which sounds alarms in my mind. I have jotted down four possible reasonable excuses, which are fairly obvious to anyone who applies his mind seriously to the subject, so I am worried about the expert who they have been talking to.

One possibility is that in the compliance procedure, a designated individual is given the information, and given the specific task of making that information available to NCIS. Somebody will say, ''I gave this information to my colleague. The company should now hand it over, and I expect that to have been done.'' Another possibility is that at the time under review, the person concerned may have been ill and may not have taken full cognisance of what was in front of him. I am sure that a court or the prosecuting authorities would want to take that into account. A third—

John McWilliam (Labour, Blaydon)

Order. This is not an intervention; this is a contribution. If the hon. Gentleman wants me to call him, I will call him, but after the hon. Member for Surrey Heath has finished.

Nick Hawkins (Conservative, Surrey Heath)

Clearly I shall have the opportunity to respond after the hon. Gentleman has spoken. I understand some of the points that he is making, but may I put to him, for a change, not the view of the Law Society of England and Wales, or even of the Law Society of Scotland, but an example of the way in which the clause may go wrong? It also comes back to the point that my hon. Friend the Member for Beaconsfield made about who will be caught by the provision. The British Bankers Association says:

''the proposed offence of failure to report (clause 324) will place staff, especially junior staff, in an impossible situation.''

Again, that is the expert view of people at the sharp end.

The BBA continues:

''The reporting of suspicion goes one step further than reporting knowledge and having reasonable grounds for suspicion goes further still. Whilst it is easy for anyone using hindsight or working in a investigative role to decide that an action is suspicious''—

using 20:20 hindsight—

''it will not necessarily be so apparent to a member of staff in a line role. Such staff will have many day-to-day pressures and may rarely ever come across a criminal activity. The BBA firmly believe that criminal sanctions for negligence should not be extended to junior staff. We do not believe that it is consistent with the Human Rights Act''—

that is particularly pertinent, given that the Government have, as usual, certified that the Bill is consistent with that Act—

''for a staff member to be potentially liable to a five-year prison sentence for a failure to act where he/she has no criminal intent.''

The British Bankers Association thinks, as we do, that the Bill goes too far.

The BBA says that the following scenarios will become reportable if the clause is not amended. The first is:

''Customer A pays a cheque into his bank account, which he knows to be worthless. Prior to the cheque being returned unpaid, Customer A draws against the uncleared cheques. Customer A does not pay any further funds into his account to settle his account.''

The second is:

''Customer B, knowing that he does not have enough funds in his account to meet his liabilities, either by way of cleared funds or authorised overdraft, uses his Switch card to purchase goods and/or to obtain cash, before the bank can put a stop on Customer B's Switch card. If Customer B has no intention to pay further funds into his account to settle these liabilities, this is either a theft offence or an offence of obtaining a pecuniary advantage by deception.

Under the existing legislation, there would be no obligation on the bank to report those offences to NCIS, as the conduct does not constitute an offence of money laundering.''

In other words, those cases are treated as small banking matters that can happen on any day of the week to any high street bank.

The BBA continues:

''With the absence of a de minimis requirement in the legislation it would create a huge burden on the money laundering reporting officers.''

Bob Ainsworth (Labour, Coventry North East)

That is not relevant.

Nick Hawkins (Conservative, Surrey Heath)

I am raising it now because the BBA's examples are both specifically concerned with clause 324, and I thought that I should deal with them together.

Will the Minister respond to the serious criticisms of the professional bodies at the sharp end? The British Bankers Association and the Law Society of England and Wales believe that the measure goes too far. The Minister may say, ''We don't agree; we have to hit all these organisations'', but we say that it will cause the entire system to grind to a halt. It will not hit the real criminals—the Mr. Bigs whom we all want to hit and against whom the Bill is really aimed. The procedure will be so unwieldy that it cannot be effective and will achieve the reverse of what the Minister is trying to do.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

The hon. Gentleman has been giving us the views of the Law Society and the British Bankers Association. What is the view of the police? I understand that the police forces of England, Wales and Scotland support the Government's proposals and disagree with those of the BBA.

Nick Hawkins (Conservative, Surrey Heath)

As the hon. Gentleman knows, I have asked the Minister on several occasions to produce something more specific from NCIS, but as yet, answer came there none. I am also interested in the views of the police, especially those who are specialists in the field. I heard what the hon. Gentleman and the hon. Member for Glasgow, Anniesland said about the views of a senior officer in the Strathclyde police. That was a relevant contribution to the Committee. I am sure that if the police had a round table meeting with the BBA and the Law Society and those two organisations said, ''If this clause is left unamended the whole system will grind to a halt''—according to the people who advise us, it is bad enough already because NCIS does not

respond when offences are reported, leaving transactions in limbo—

The rest of the debate is in Hansard.